House Hearing, 111TH Congress - Rare Earth Minerals and 21ST Century Industry

RARE EARTH MINERALS AND
21ST CENTURY INDUSTRY

HEARING
BEFORE THE
SUBCOMMITTEE ON INVESTIGATIONS AND

OVERSIGHT
COMMITTEE ON SCIENCE AND

TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
MARCH 16, 2010
Serial No. 11186

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COMMITTEE ON SCIENCE AND TECHNOLOGY

HON. BART GORDON, Tennessee, Chair
JERRY F. COSTELLO, Illinois
RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER JR.,
LYNN C. WOOLSEY, California
Wisconsin
DAVID WU, Oregon
LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington
DANA ROHRABACHER, California
BRAD MILLER, North Carolina
ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois
VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona
FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland
JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio
W. TODD AKIN, Missouri
N, New Mexico
BEN R. LUJA
RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York
BOB INGLIS, South Carolina
STEVEN R. ROTHMAN, New Jersey
MICHAEL T. MCCAUL, Texas
MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah
BRIAN P. BILBRAY, California
LINCOLN DAVIS, Tennessee
ADRIAN SMITH, Nebraska
BEN CHANDLER, Kentucky
PAUL C. BROUN, Georgia
RUSS CARNAHAN, Missouri
PETE OLSON, Texas
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
JOHN GARAMENDI, California
VACANCY
SUBCOMMITTEE
ON
INVESTIGATIONS
AND
OVERSIGHT
HON. BRAD MILLER, North Carolina, Chair

STEVEN R. ROTHMAN, New Jersey
PAUL C. BROUN, Georgia
LINCOLN DAVIS, Tennessee
BRIAN P. BILBRAY, California
CHARLES A. WILSON, Ohio
VACANCY
KATHY DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
BART GORDON, Tennessee
RALPH M. HALL, Texas
DAN PEARSON Subcommittee Staff Director
JAMES PAUL Democratic Professional Staff Member
KEN JACOBSON Democratic Professional Staff Member
TOM HAMMOND Republican Professional Staff Member
(II)
CONTENTS
March 16, 2010
Page
Witness List .............................................................................................................

Hearing Charter ......................................................................................................
2
3
Opening Statements
Statement by Representative Bart Gordon, Chairman, Committee on Science
and Technology, U.S. House of Representatives ...............................................
Written Statement ............................................................................................
Statement by Representative Brad Miller, Chairman, Subcommittee on Investigations and Oversight, Committee on Science and Technology, U.S. House
of Representatives ................................................................................................
Statement by Representative Paul C. Broun, Ranking Minority Member, Subcommittee on Investigations and Oversight, Committee on Science and
Technology, U.S. House of Representatives .......................................................
11
12
11
14
15
15
Witnesses:
Dr. Stephen Freiman, President, Freiman Consulting, Inc.
Oral Statement .................................................................................................
Biography ..........................................................................................................
Dr. Steven J. Duclos, Chief Scientist and Manager, Material Sustainability,
General Electric Global Research
Oral Statement .................................................................................................
Biography ..........................................................................................................
Dr. Karl A. Gschneidner, Jr., Anson Marston Distinguished Professor, Department of Materials Science and Engineering, Iowa State University
Oral Statement .................................................................................................
Biography ..........................................................................................................
Mr. Mark A. Smith, Chief Executive Officer, Molycorp Minerals, LLC
Oral Statement .................................................................................................
Biography ..........................................................................................................
Mr. Terence Stewart, Esq., Managing Partner, Stewart and Stewart
Oral Statement .................................................................................................
Biography ..........................................................................................................
Discussion
Early Warning for Material Supply Problems ...................................................
How to Compete With China ..............................................................................
Prioritizing Responses to Shortage .....................................................................
Role of Federal Agencies ......................................................................................
Improving Research Infrastructure ....................................................................
Funding for Rare Earth Research ......................................................................
Domestic Sources of Rare Earths .......................................................................
Expanding U.S. Workforce ..................................................................................
Dependence on Foreign Products ........................................................................
(III)
17
21
24
25
26
30
30
33
46
47
49
61
62
63
68
68
70
70
71
73
73
74
75
75
IV
Page
Maintaining a Complete Supply Chain ..............................................................

Keeping Manufacturing in the U.S. ...................................................................
Balancing Private and Public Needs ..................................................................
Chinese Industrial Strategy ................................................................................
Funding Models for Materials Research ............................................................
Timeframe for Re-Starting Domestic Production ..............................................
76
77
78
78
78
79
Appendix: Answers to Post-Hearing Questions

Dr. Stephen Freiman, President, Freiman Consulting, Inc. ................................
Dr. Steven J. Duclos, Chief Scientist and Manager, Material Sustainability,
General Electric Global Research .......................................................................
Dr. Karl A. Gschneidner, Jr., Anson Marston Distinguished Professor, Department of Materials Science and Engineering, Iowa State University ...............
Mr. Mark A. Smith, Chief Executive Officer, Molycorp Minerals, LLC ..............
Mr. Terence Stewart, Esq., Managing Partner, Stewart and Stewart ................
82
83
85
87
88
RARE EARTH MINERALS AND 21ST CENTURY

INDUSTRY
TUESDAY, MARCH 16, 2010
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT,
COMMITTEE ON SCIENCE AND TECHNOLOGY,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:01 p.m., in Room
2318 of the Rayburn House Office Building, Hon. Brad Miller
[Chairman of the Subcommittee] presiding.
(1)
3
HEARING CHARTER
Purpose
The United States, as part of its strategy to reduce emissions from electricity generation and transportation, is investing significant funds in renewable energy technologies such as wind power and hybrid vehicles. The American Recovery and Reinvestment Act provides $2.3 billion for advanced energy manufacturing facilities, including wind turbine manufacturing plants. The Act further makes available $2 billion . . . for Advanced Battery Manufacturing grants to support the manufacturing
of advanced vehicle batteries and components . . . Yet these investments may fail
to prompt the desired outcomea buoyant industry producing renewable energy
systemsfor lack of rare earth minerals.1
The United States finds itself dependent on the Peoples Republic of China for a
commodity without which it would be hard to compete in high-technology industries.
With a near-monopoly in supplies of rare earths, the Chinese government threatens
to limit exports and tries to induce manufacturing firms to locate their facilities in
Inner Mongolia. The main American supplier is seeking funding to restart its mining operation, which closed in 2002, having suffered from low prices as China expanded into the market and from a late start on renewing its environmental permits
in California. Support for research has diminished.
This hearing by the Subcommittee on Investigations and Oversight will examine
these intertwined threads to determine ways of redressing the expected imbalance
between available supplies of rare earths and the Nations need for them. The hearing will also ask why the policy structure put in place thirty years ago precisely to
identify and respond to situations like this before they became acute bottlenecks
failed to do its job.
Witnesses
Dr. Stephen W. Freiman
President, Freiman Consulting, Inc.
Member, National Research Council Committee on
Critical Mineral Impacts on the U.S. Economy
Dr. Freiman will present the findings and recommendations of the most recent
National Research Council study evaluating potential responses to fluctuations in
the supply-demand balance for minerals and materials. The Council included rare
earth minerals among the cases analyzed, concluding that there are sufficient supply risks for rare earths to be classified as a critical resource. Dr. Freiman, a materials scientist, served as Chief of the Ceramics Division and Director of the Materials Science and Engineering Laboratory during a career at the National Institute
of Standards and Technology that spanned 28 years. A specialist in the fracture of
brittle materials, he has published more than 150 scientific papers.
Dr. Steven Duclos
Chief Scientist and Manager, Material Sustainability
General Electric Global Research
Dr. Duclos will testify on the process underlying General Electrics Materials Sustainability Initiative, which assesses the companys businesses for risks posed by
lack of raw materials. If a problem is identified, are there steps to reduce that risk
by finding substitutes, reducing the need for the material or recycling? Terbium, one
of the rare earths, was identified as a high risk for GE by the Initiative. Dr. Duclos
managed the companys Optical Materials Laboratory, working with GE units to develop advanced materials. He came to GE from a post-doctorate position at the
AT&T Bell Labs studying superconductivity in buckminsterfullerene, the form of
carbon popularly known as buckyballs.
Dr. Karl A Gschneidner, Jr.
Anson Marston Distinguished Professor
Department of Materials Science and Engineering
Iowa State University
1 These minerals were named Rare Earths at the time of their discovery as they were originally found in the form of oxides (bound together with oxygen; compounds were called earths
by scientists in the late 18th Century). Rare reflected the fact that the Swedish scientists who
originally separated the various compounds had not encountered them before. Today, the name
is somewhat misleading in that . . . even the two least abundant, thulium and lutetium, are
nearly 200 times as abundant as gold . . .. Committee on Critical Mineral Impacts on the U.S.
Economy, Minerals, Critical Minerals and the U.S. Economy (Washington: National Research
Council, 2008); p. 133 (hereafter cited as NRC Report).
4
Dr. Gschneidners testimony will focus on current studies of rare earths and the
processes needed to convert the ores into industrially-useful materials. He has also
been asked for comments to recommend improvements in the existing U.S. research
program. In addition to his professorship at Iowa State University, Dr. Gschneidner
holds the position of Senior Metallurgist at the Ames National Laboratory of the Department of Energy. He has researched the properties of rare earth minerals, has
served as the Senior Editor of the Handbook of the Physics and Chemistry of Rare
Earths since 1976 and was for years Director of the Ames Laboratory Rare Earth
Information Center. Dr. Gschneidner is currently funded by DOE to design a refrigerator using magnets to control temperatures. He was elected to the National Academy of Engineering in 2007.
Mr. Mark Smith
Chief Executive Officer
Molycorp Minerals, LLC
Mr. Smiths company is focused on restarting the mine in Mountain Pass, California, holding the primary source of rare earth minerals in the United States. The
mine was previously owned by the mining subsidiary of the Chevron Corporation,
which acquired it as part of its purchase of the Union Oil Company of California.
Mr. Smith, who served as head of Chevrons mining subsidiary, left to become President and CEO of Molycorp in April 2006 and negotiated to buy the Mountain Pass
mine from his old company in 2007. Operations at the mine were halted after accidental spills and failure to complete environmental permits required by the State
of California. Mr. Smith has been asked to describe his plan for restoring mining
operations and for expanding the company into the production of magnets for nextgeneration wind turbine generators.
Mr. Terence Stewart, Esq.
Managing Partner
Stewart and Stewart
Mr. Stewart has an extensive history in international trade and customs law. He
is a leading expert on the World Trade Organization and has assisted industry and
labor groups with trade issues. Given Chinas outsized role in the rare earths market and its efforts to increase its influence in high-technology industries, Mr. Stewart has been invited to present his insights into Chinas policies and actions on resource issues and into their ramifications for U.S. industry and the economy.
Background
In November 2009, the Australian Broadcasting Corporation summarized the rare
earths issues quite succinctly:
The rare earth metals story is one lens through which we can view changing
world economics, the ways and the pitfalls of how China integrates with the
capitalist world, and global trade. China provides more than 90% of the worlds
supply of rare earths. The business media in particular is full of stories of how
if the Chinese hold back on their supply of rare earths, your iPhone wont work.
And more, much more. Climate change comes into it, too, because the green
technologies are very dependent on rare earths.2
The current issues relating to rare earths supply and demand represent the latest
instance of a continuing story in which what was an obscure, commodity mineral
or material suddenly assumes outsized importance. Industry finds new uses that
strain supplies, and American firms find that there are no domestic suppliers. In
1985, the Office of Technology Assessment (OTA) published Strategic Materials:
Technologies to Reduce U.S. Import Vulnerability in response to concerns that
Three nations, South Africa, Zaire, and the U.S.S.R., account for over half of
the worlds production of chromium, cobalt, manganese, and platinum group
metals. These metals are essential in the production of high-temperature alloys,
steel and stainless steel, industrial and automotive catalysts, electronics, and
other applications that are critical to the U.S. economy and the national defense
. . ..3
2 Stan Correy. Background Briefing: Rare Earths and China. Australian Broadcasting Corporation transcript, November 15, 2009. Accessed at http://www.abc.net.au/rn/
backeroundbriefing/stories/2009/2738774.htm, January 28, 2010.
3 Strategic Materials: Technologies to Reduce U.S. Import Vulnerability (Washington, DC: U.S.
Congress, Office of Technology Assessment, OTAITE248, May 1985); p.3.
5
At that time, OTA identified the following as options for the Federal Government
to pursue: increase exploration for domestic sources, find new overseas suppliers,
find substitutes or reduce the need. Many of these same options apply to the case
of rare earth mineralsalthough the unique properties that make these elements
valuable may not be found in any substitute materials or minerals.4
The Global Rare Earths Playing Field
The United States Geological Surveys Minerals Information Team annually publishes Mineral Commodity Summaries, collecting information on supply, demand
and market activity on some 90 minerals and materials, among them the rare
earths. In January 2010, the most recent summary for the rare earths was issued,
with data current to 2008.5 USGS reported there that the United States was completely dependent on imports: between 2005 and 2008, 91% of its consumption came
from China, 3% from France, 3% from Japan, 1% from Russia and 2% from other
sources. The estimated cost of processed ore suitable for extracting rare earths rose
from $6.61 to $8.82 per kilogram between 2007 and 2008, then dropped back to
$5.73 during 2009.6
USGS issued the following assessment of global rare earths supply: 7
Actions by the Chinese government (see the next section) and growing world investment in renewable energy equipment have reinvigorated efforts to identify new
sources for rare earths. Molycorp restarted its separation plant in 2007 and is processing residual materials from its mine tailings. Australia has begun production at
its Mt. Weld deposit. Evaluation of the economic viability of producing in Canada
and Malawi is underway.8 An Australian mining company is also studying a deposit
in Greenland that could satisfy some 25% of world needs over the next fifty years.9
Still, as Mr. Smith of Molycorp notes, it takes significant funding and time to bring
new mines into production, and volatility in a commodity market can upset even
well-laid plans.
China and the Global Market
Indications that China intended to reduce exports of the rare earth materials is
a major reason that this issue has recently gained prominence. Reports last year
indicated that the Ministry of Industry and Information Technology had submitted
the draft of a six-year plan to the State Council of China that contemplated deepening existing cuts in shipments of minerals like dysprosium.10 The ministry stated
4 NRC Report, p. 131.
5 James B. Hedrick, Rare Earths, in Mineral Commodity Summaries 2009 (Reston, VA:
United States Geological Survey; January 2010); pp. 128129.
6 Ibid., p. 128.
7 Ibid., p. 129.
8 Ibid.
9 Leo Lewis, Greenland Challenge to Chinese Over Rare Earth Minerals, London Times, October 5, 2009; p. 39.
10 Keith Bradsher, China Tightens Grip on Rare Minerals, New York Times, September 1,
2009; p. B1. See also Ambrose Evans-Pritchard, World Faces Hi-Tech Crunch as China Eyes
Ban on Rare Metal Exports, Telegraph.co.uk on August 24, 2009 at 5:58 PM BST. Accessed
Continued
6
that it was concerned that China lacked enough of the minerals to meet its own
needs.11 The Japanese Ministry of Economy, Trade and Industry had earlier developed a Strategy for Ensuring Stable Supplies of Rare Metals after the threat that
China might limit supplies came to the attention of the Cabinet in Tokyo.12
The rare earths issue showcases two major elements of Chinas strategy for economic development:
the targeting of critical industries that are to be kept under government control; and
the use of subsidies and other incentives to attract foreign investment that
will result in moving Chinas production up the value chain, bringing advanced technology into the country, and generating sophisticated exports.
Non-ferrous metals, the category into which rare earths fall, represent one of six
industries that the Chinese government considers most central to economic performance and growth. The other five of these Heavyweight Industries are machinery;
automobiles; information technology; construction; and iron and steel. Plans to keep
the nations economy under control call for state ownership of the three largest
firms in each industry.13
Chinas government has long been aware of its rare earths deposits potential
value and thought of them in strategic terms. An official publication quotes a 1992
statement by then-Paramount Leader Deng Xiaoping that there is oil in the Middle
East; there is rare earth in China. In conjunction with a 1999 visit to Inner Mongolia, where Chinas largest deposit of rare earth minerals is located, then-President
Jiang Zemin wrote: Improve the development and applications of rare earth, and
change the resource advantage into economic superiority. 14
Although China has reportedly abandoned a provision in its Rare Earths Industry
Development Plan 200915 that would have placed an absolute ban on the export
of five of the 17 rare earths, a ban on exports of raw ores continues, as does the
progressive lowering of exports quotas on other forms of the materials that began
in 2006. Officials in China make no secret of their desire to bring the manufacturing
of the high-value-added products containing rare earths into China. We want rareearth industries to locate in Inner Mongolia, Zhao Shuanglin, vice chairman of
Inner Mongolia Autonomous Region, stated in September 2009.15 At around the
same time, Zhang Peichen, the deputy director of Baotou Rare Earth Research Institute in Inner Mongolia, predicted: Rare earth usage in China will be increasingly
greater than exports. 16
While its current near-monopoly in rare earths gives it a potent stick, China has
had outstanding success in using the carrot to enlist foreign-based corporations help
in building up its economy. For the past 15 years or more, multinational companies
have shown themselves eager to establish a presence in China to gain access to the
countrys potentially huge market. But that is not the only reason they have sited
production and, more recently, research capacity there. China has attracted the
worlds largest manufacturers by offering discounted land, energy, and taxes to relocate in China and to use China as a global export platform, according to the U.S.China Economic and Security Review Commission. As a result, more than half of
Chinas exports originate from foreign-invested manufacturing enterprises located in
China. 17
at
http://www.telegraph.co.uk/finance/commentlambroseevanspritchard/6082464/Worldfaces-hi-tech-crunch-as-China-eves-ban-on-rare-metal-exports.html, October 15, 2009.
11 Feiwen Rong and Xiao Yu, Shortage of Rare Earths Used in Hybrids, TVs May Loom in
China, Bloomberg News on September 3, 2009 at 4:54 AM EDT. Accessed at http://
www.bloomberg.com/apps/news?pid=20601080&sid=afn.hOk6eEHq, October 17, 2009.
12 Ministry of Economy, Trade and Industry, Announcement of Strategy for Ensuring Stable
Supplies of Rare Metals, July 28, 2009. Accessed at http://www.meti.go.jp/english/press/
data/2009072801.html, October 15, 2009.
13 A similar plan is in place for the countrys seven Strategic industries: armaments; power
generation and distribution; oil and petrochemicals; telecommunications; coal; civil aviation; and
shipping. The firms in this sector are to be subject to absolute control by the government,
while, in the Heavyweight sphere, the government is looking for no more than a dominant
presence. U.S.-China Economic and Security Review Commission, Hearing on Chinas Industrial Policy and its Impact on U.S. Companies, Workers, and the American Economy, testimony
of George Haley, March 24, 2009.
14 Rare Earth: An Introduction, Baotou National Rare Earth Hi-Tech Industrial Development Zone, accessed at http://www.rev.cn/en/int.htm, January 29, 2010.
15 Chuin-Wei Yap, Will China Tighten Rare Earth Grip?, Wall Street Journal, September
3, 2009; p. C12.
16 Bradsher, loc. cit.
17 U.S.-China Economic and Security Review Commission, 2009 Report to Congress (Washington: U.S. Government Printing Office, November 2009); p. 43.
7
Preferential Policies designed to attract foreign firms to the Baotou National
Rare Earth Hi-Tech Industrial Development Zone, located less than 100 miles from
Chinas huge rare earths mine at Bayan Obo in Inner Mongolia, include both funding mechanisms and significant tax incentives. For example, hi-tech enterprises
and venture capital companies are exempt from income tax for their first five years
operating in the Zone, then pay at only half of the regular 15 percent rate during
a second five-year period. They receive breaks on VAT and operations taxes as
well.18 The Baotou Industrial Development Zones Web site lists 25 options on a
page titled Projects Seeking Investment, many of them focusing on rare earths
and several of them in the area of green technologies. Among these projects are:
Nickel Hydrogen Power Battery Polar Plate;
Hydrogen-Store Alloy Powder Cathode Material of Ni-Hydrogen Power Battery;
Industrialization of Rare Earth Ceramic Piston Ring;
Production Line of Rare Earth Giant Magnetostrictive Alloy;
The Technology of Special Rare Earth Ceramic Thermocouple Tube;
Industrialization of Nanometer Crystal Rare Earth Alloy Magnetic Powder;
and
Annual Production of 200000 Units of Magnet Motor for Electric Bicycle.19
Reviving Research
Iowa State University (ISU) became a hub of rare earth research as its contribution to the Manhattan Project.20 Dr. Gschneidner carries on the tradition in rare
earth research, focusing today on the behavior of rare earths at low temperatures
or in high magnetic fields. He is currently receiving funds from the Department of
Energy to build a refrigerator that achieves cooling by magnetism, employing
magnets containing rare earths. Dr. William McCallum has recently begun seeking
a cheaper or more readily available substitute for the rare earths incorporated into
the permanent magnet used in a hybrid vehicles generator. If his project is successful, a potential bottleneck for hybrid vehicle manufacturers will be eliminated.
These are elements of the broader effort on magnet development at the Lab.21 Both
Drs. Gschneidner and McCallum served as director for the Rare Earth Information
Center at Ames. Established as an information clearinghouse on the minerals by the
Atomic Energy Commission in 1966, it was closed in 2002.
In discussing the needs for research in minerals and materials, the NRC Committee on Critical Mineral Impacts on the U.S. Economy drew heavily on a 2006
industry study by the Industrial College of the Armed Forces.22 That analysis
placed rare earths in a category recommended for government support to develop
materials offering superior properties for defense and commercial applications. Designers and engineers prefer materials with well-understood properties, but this
conservative tendency can stymie innovation by limiting the opportunity to improve
performance or efficiency. Agencies like NASA and the Department of Defense invest in studies of materials to put real-world data into the handbooks that program
managers consult when writing system specifications. The decision to employ a new
18 Preferential Policies, Baotou National Rare Earth Hi-Tech Industrial Development Zone,
accessed at http://www.rev.cn/en/pre.htm, January 29, 2010.
19 Catalog, Baotou National Rare Earth Hi-Tech Industrial Development Zone, accessed at
http://www.rev.cn/en/pro.htm, January 29, 2010.
20 The first chain reaction, initiated December 2, 1942, used natural uranium, which is very
low in the fissionable isotope U235. When a U235 atom splits, rare earths may be among the
resulting fragments. Because these might soak up the excess neutrons in the reactor that would
sustain the chain reaction, research was needed on how to separate rare earths from uranium
and plutonium. Iowa State succeeded in developing separation methods that could produce rare
earths that were sufficiently purified to permit the needed research program. Harry J. Svec,
Prologue, in Gschneidner and Eyring, eds., Handbook on the Physics and Chemistry of the
Rare Earths, Vol. 11 (Amsterdam: Elsevier Science Publishers, BV, 1988); p. 15. In 1947, the
newly-formed Atomic Energy Commission chose the school as the home for the Ames National
Laboratory and appointed Dr. Frank Spedding as its first director. Spedding, a leader in rare
earth chemistry, improved his original processing methods to the point where Ames became the
major supplier to the scientific community and the AEC laboratories. Spedding oversaw an extensive basic research effort characterizing the properties of rare earths in solutions and continued to develop industrial-scale processing for these materials. Ibid., p. 16.
21 Communication from Iver Anderson, Senior Metallurgist, Ames National Laboratory, January 7, 2010.
22 Lt. Col Carl Buhler, USAF et al. Strategic Materials: AY 20052006 Industry Study Final
Report. Industrial College of the Armed Forces, National Defense University, Ft. McNair, Washington, D.C., 2006. (hereafter cited as ICAF Report)
8
material often requires reworking existing production methods or introducing entirely new processes. Perfecting these can consume years, and the government may
be alone in its willingness to support a project lasting that long.23
The NRC report notes: Many government efforts specifically focus on innovative
research in materials specialties. These efforts support a variety of worthwhile research in materials science. However, individual agencies award many of these
grants on an individual or somewhat ad hoc basis that is not the product of a coordinated research strategy. In particular, they rarely address mineral information
needs or consider mineral supply and demand data or criticality, either short or long
term. 24 The panel therefore calls for:
Theoretical geochemical research to better identify and quantify virgin stocks
that are potentially minable;
Research on extraction and processing technology to improve energy efficiency, decrease water use, and enhance material separation;
Research on remanufacturing and recycling technology, key components in increasing the rate and efficiency of material reuse; and
The characterization of stocks and flows of materials, especially imports and
exports, as components of products, and of losses upon product discard. This
lack of information impedes planning on many levels.25
This proposed program is consistent with the research effort required by the National Materials and Minerals Policy, Research and Development Act of 1980.26
The Policy Framework
Thirty years ago, the National Materials and Minerals Policy, Research and Development Act was enacted because
. . . [T]he United States lacks a coherent national materials policy and a coordinated program to assure the availability of materials critical for national
economic well-being, national defense, and industrial production, including
interstate commerce and foreign trade . . ..27
The Congress declared it the Presidents responsibility to coordinate a plan of research and other actions that would . . . promote an adequate and stable supply
of materials necessary to maintain national security, economic well-being and industrial production with appropriate attention to a long-term balance between resource
production, energy use, a healthy environment, natural resources conservation, and
social needs.28 Our current situation with rare earth minerals indicates that successive Administrations failed to carry out this policy.
The 1980 Act directed development of a plan that would, among other outcomes,
produce continuing assessments of demand for minerals and materials in the economy; conduct a vigorous research and development effort; collect, analyze and disseminate information; and cooperate with the private sector and other nations.29 In
April 1982, President Reagan delivered a response to that directive.30
Dissatisfied with the plan and its implementation, Congress decided in the National Critical Materials Act of 1984 to establish a National Critical Materials Council in the Executive Office of the President to serve as the focal point for critical
materials policy. The Council was tasked to assist the President in carrying out the
requirements of the 1980 Act.31 Yet by 1989, as the first Bush Administration took
office, reports indicated that the Council was effectively moribund and that President Reagans final budget request recommended that it be eliminated.32 Senator
Harry Reid took strong exception to the view of Acting Council Chairman Thomas
Moore . . . that there is no need for a centralized agency like the council because
other agencies already are authorized to address critical material issues. 33 The
Council survived that brush with extinction, but ultimately succumbed to a rec23 Ibid.,
pp. 69.
Report, p. 195.
p. 192.
26 30 U.S.C. 1602(2).
27 30 U.S.C. 1601(a)(6).
28 30 U.S.C. 1602.
29 30 U.S.C. 1603.
30 National Materials and Minerals Program Plan and Report to Congress, April 1982.
31 30 U.S.C. Chapter 30.
32 New budget to cut NCMC, R&D at Mint and land purchases, Metals Week, January 16,
1989; p. 3.
33 Marilyn Werber, Senator Blasts Plan to Abolish NCMC, American Metal Market, April 6,
1989; p. 2.
24 NRC
25 Ibid.,
9
ommendation by President Clintons science advisor, Director of the Office of Science
and Technology Policy (OSTP) Dr. John Gibbons, to terminate the Council and
transfer its responsibilities to the National Science and Technology Council (NSTC)
established within OSTP by Executive Order 12881.34 Funding for the Critical Materials Council was dropped in the Fiscal Year 1994 General Government Appropriation Act.35
In 1995 and 1996, the NSTC published reports on The Federal Research and Development Program in Materials Science and Technology. No equivalent report has
been produced since, however, and inquiries made of OSTP failed to locate the
long-range assessments of materials needs related to scientific and technological
concerns or scientific and technical changes over the next five years whose annual
preparation the statute requires.36 It empirically demonstrates the failure to implement the responsibilities assigned by Congress in the 1980 Act through multiple administrations. The Committee has learned that the situation with rare earth supplies has galvanized OSTP to convene a group of senior officials and subject-matter
experts from a number of Federal agencies to discuss the potential utility of White
House coordination in the matter. The Committee has decided to revisit policy
issues it thought it had settled decades ago to determine how to avoid finding ourselves in similar straits in the future.
Appendix: The Value of Rare Earth Minerals
The subject of todays hearing is the 15 elements found in the so-called lanthanide
series of the Periodic Table.37 The U.S. Geological Survey describes them as iron
gray to silvery lustrous metals that are typically soft, malleable, ductile, and usually
reactive, especially at elevated temperatures or when finely divided. 38
34 Ex. Ord. 12881, Establishment of the National Science and Technology Council, November
23, 1993; 58 Fed. Reg. 62491. Dr. Gibbons tied the reorganization both to President Clintons
decision to reduce staff within the White House and to the National Performance Review conducted by Vice President Gore. Bill Loveless, Gibbons to Propose Formation of Science and
Tech Council, Federal Technology Report, September 2, 1993; p. 1.
35 Public Law 103123, October 28, 1993.
36 30 U.S.C. 1604(b)(2) and (3).
37 As scandium and yttrium fail within the same period (column) on the Periodic Table, they
are often counted as rare earths. The actinide series (the elements between actinium and
lawrencium) can also be included, but they are noted mostly for their radioactive properties and
are not the subject of the hearing.
38 James D. Hedrick, 2007 Minerals Yearbook. Rare Earths (Reston: U.S. Geological Survey,
2009); p. 60.1.
10
These elements are normally obtained as byproducts from mining for other materials. The chemical properties of these elements are quite similar, which complicates
separating them; the production process must be tailored to the composition of the
ore extracted from a given deposit.
Industry tends to divide these into light and heavy elements, moving from lanthanum to the right along the row. The heavy elements tend to have greater economic value. One aspect of the supply problem for the United States is that the
Mountain Pass deposit lacks many of the heavier elements, whereas the major Chinese producer, the Bayan Obo mine, can provide the more valuable dysprosium and
terbium.
Rare earths contribute to a number of industries, usually incorporated into metal
alloys to enhance electrical or magnetic capabilities. The hearing today will consider
their major contributions to renewable energy applications. Electrical generators
need magnets; a smaller magnet producing a stronger field can reduce the final size
of a wind turbine even as its power output increases. Combining neodymium with
iron and boron, or samarium with cobalt, can produce these more efficient components. Hybrid automobiles, such as Toyotas Prius or the new Chevrolet Volt, depend on rechargeable batteries. Incorporating lanthanum into the nickel-metal-hydride battery electrolyte enhances the power output, resulting in increased vehicle
range even as the battery itself gets smaller and lighter.
The following chart gives some sense of the breadth of other uses:
Having applied the criticality matrix developed as part of their study, the NRC
committee concluded:
The relatively high composite weighted score for REs [rare earths] of 3.15 . . .
[on a scale of 14] reflects the diversity of applications for the RE family, the
importance of those applications, and the steady growth in consumption and has
led our committee to suggest that disruptions in the availability of REs would
have a major negative impact on our quality of life . . .. In our view, most of
the applications are somewhat to very important since substitutes are generally
less effective.39
39 NRC
Report, p. 133.
11
Chairman MILLER. This hearing will now come to order. Good
afternoon. Welcome to todays hearing entitled Rare Earth Minerals
and 21st Century Industry.
Before we begin, we have a request from the gentleman from
Colorado, Mr. Coffman, to join the Subcommittee for this hearing,
and unless there is an objectionhearing none, I would like to invite him to join us on the dais, which he is already there. You may
remain where you are, and I will remind folks that non-committee
members are only recognized for questions after all committee
members have been recognizedwhich will not be that much of a
problem today, it does not look like.
We will now recognize Mr. Gordon is here, and I understand that
he has votes in another committee shortly, so we will recognize him
first so he may go to vote.
Chairman GORDON. Thank you, Chairman Miller, and Ranking
Member Broun for having this hearing, and I want to thank the
staff for doing a good job in gathering this material. I do want to
attend as much as I can. I will be back after these votes.
Last September, I saw an article on this issue 1 that raised a
number of questions in my mind about whether the committee
this committee and Congress were doing enough to support American business and American jobs.
Rare earth minerals are an essential component of a wide array
of emerging industries: clean energy, telecommunications, and our
defense industry. And I noticed that one country, and we are not
here to beat up on that one country, but nature made one country
seem to have about 90 percent of these rare earth materials, and
they seem to be trying to capture the rest ofor a large part of
that other ten percent, which gives me pause.
This is not the first time the committee has been concerned with
the competitive implications of materials such as rare earths. In
1980, 30 years ago, this committee established a national minerals
and materials policy.2 One core element in that legislation was the
call to support for a vigorous, comprehensive and coordinated program for the materials research and development.
Unfortunately, over successive administrations, the effort to keep
the program going fell apart. Now, it is time to ask whether we
need to revive and coordinate an effort to level the playing field on
rare earths.
In particular, I want to learn if there is a need for increased research and development to help address this Nations rare earth
shortage or if we need to re-orient the research we already have
underway.
Based on my review of the written submissions, it appears that
we could benefit from more research both in basic and applied materials.
The rare earths are not the only materials in which the United
States is largely or exclusively dependent on foreign sources. Ac1 Keith Bradsher. China Tightens Grip on Rare Minerals. New York Times, September 1,
2009; pp. B1, B4.
2 Public Law 96499, the National Materials and Minerals Policy, Research and Development
Act of 1980; enacted October 21, 1980.
12
cording to the U.S. Geological Survey, there are 18 other minerals 3
and materials where the United States is completely dependent on
foreign sources.
And a bit of a collateral subject that I would like for you to address is, there are those minerals and elements that arent rare or
close to being rare, but go through periods of time where they are
being very vogue in using manufacturers. So they can becomeor
our resources can become strained during those periods of time.
And then a new manufacturing process comes in and they may go
down. Do we need to have some kind of inventory? Do we need to
be watching out for those other?
So Mr. Chairman and Mr. Broun, thank you for having this hearing. I think this is going to be very informative and hopefully can
lead us to some potential legislation that would be good for our national defense and our national competitiveness.
[The prepared statement of Chairman Gordon follows:]
PREPARED STATEMENT
OF
CHAIRMAN BART GORDON
Id like to thank Chairman Miller for calling this hearing. Last September, I saw
an article on this issue that raised a number of questions in my mind about whether
the Committee and the Congress were doing enough to support American business
and American jobs.
Rare earths are an essential component in a wide array of emerging industries.
This is not the first time the Committee has been concerned with the competitive
implications of materials such as rare earths. In 198030 years agothis Committee established a national minerals and materials policy. One core element in
that legislation was the call to support for a vigorous, comprehensive and coordinated program of materials research and development.
Unfortunately, over successive administrations, the effort to keep that program
going fell apart. Now, it is time to ask whether we need to revive a coordinated effort to level the playing field in rare earths.
In particular, I want to learn if there is a need for increased research and development to help address this Nations rare earth shortage, or if we need to re-orient
the research we already have underway.
Based on my review of the written submissions, it appears that we could benefit
from more research both in basic and applied materials sciences.
Rare earths are not the only materials in which the U.S. is largely or exclusively
dependent on foreign sources. According to the U.S. Geological Survey, there are
eighteen other minerals and materials where the United States is completely dependent on foreign sources.
Someone needs to be telling us whats going on with those before we read about
it in the New York Times. Legislation may be the best way to institutionalize a renewed focus and expanded commitment to identifying shortages and needs before
they become a crisis.
Again, Mr. Chairman, I appreciate you holding this hearing and expect a stimulating discussion. I yield back my time.
Chairman MILLER. Thank you, Mr. Gordon. I neglected to mention in my quick introduction that this is an issue in which Mr.
Gordon has shown a great interest and that this hearing is at Mr.
Gordons urging. It is one of the habits of highly effective subcommittee chairs to pay attention to what the Full Committee
Chair urges, and I have done so in this case.
The usual order would be Democrat, Republican, Democrat, so
you want me to go? All right.
Well, I also want to welcome everyone to this hearing on something that most of us have either never heard of or promptly forgot
after our test on the periodic table in high school chemistry. Dr.
3 U.S. Geological Survey. Mineral Commodity Summaries 2009 (Washington: Government
Printing Office, 2009; p. 6.
13
Broun may have taken it up in medical school, but for me, if I was
exposed to it at all, it was some considerable time ago.
Today we will be discussing rare earth elements, which really
arent all that rare, but rare earth elements are crucial to making
the magnets and batteries needed for the energy industry of the
21st century. With a little of one of those elements you can get a
smaller, more powerful magnet, or an aircraft engine that operates
at higher temperatures or a fiber-optic cable that can carry your
phone call much greater distances.
The United States, not so long ago, was the world leader in producing and exporting rare earths. Today, Mr. Gordon delicately
said another nationor one nationcontrolled much of the worlds
market. I will be less delicate and name the nation. China is the
worlds leader. We are having this hearing in part to recognize that
the Chinese have some different ideas about how to get the greatest benefit from this suddenly valuable commodity beyond simply
digging it up and selling it to those who want to use it in their
high-tech manufacturing. China appears to view rare earths as one
of the incentives they can offer a technology firm scouting for a
new plant location. How do we compete in attracting and retaining
manufacturing high-tech firms that need access to rare earth elements in light of Chinas current near monopoly and their willingness to use their monopoly power to our disadvantage?
The most immediate step would be to get some competition back
into the supply of rare earths. One of our witnesses, Mr. Mark
Smith, is proposing to do just that. His company owns a mine that
could produce, has in the past, many rare earth elements if it were
to reopen. He will describe today not only what it would take to
restart the mine but also his intent to augment Americas capability to produce the magnets needed for electrical generators in
wind turbines.
From what he has told us in preparation for the hearing, he has
found it hard to get help in making his vision a reality. If we intend to rebuild Americas capability to supply our own needs in
rare earth materials, if we intend to foster a home-grown capability
to make the devices that provide wind energy, we cant succeed unless Mr. Smith and others like him succeed.
Further, are we investing enough in research, as Mr. Gordon
said, looking into ways to recover and recycle those materials and
looking for alternatives or synthetic options? Are there efficiencies
that could be gained in the use of rare earth minerals? For example, if you work with rare earths at the nanoscale level, could you
get the same improvements in material performance using
micrograms where today you need kilograms? There arent a lot of
places where people are currently working to answer those questions even as the answers could go far in helping the United States
compete in the alternative energy technology industries springing
up around the world.
This is not the first time this committee has wrestled with rare
earth and critical materials issues. It is the first time in my service
here but not the first time the committee has struggled with the
issue.
Our committee established a national policy in minerals and materials three decades ago. That 1980 law requires a continuing as-
14
sessment of mineral and materials markets to alert us to looming
problems such as supply disruptions, price spikes and the like.
Four years later we followed up by establishing the Critical Materials Council 4 to assure that someone was minding the store.
However, you wont find the Critical Materials Council in the
White House organization chart today. It disappeared into the National Science and Technology Council in 1993,5 and the high level
attention to rare earths, and other materials, dropped off as a priority.
While preparing for this hearing, we have learned that the Office
of Science and Technology has recently organized a new interagency committee to respond to our rare earth problems. An obvious question arises. If the Critical Materials Council had been
maintained, might we be in a better position now to protect our
Nations interests in a strong rare earths industry? How can we reverse the result of that history of neglect?
The Subcommittee thanks the witnesses for helping us address
these issues, and I anticipate an interesting discussion when the
questions begin.
[The prepared statement of Chairman Miller follows:]
PREPARED STATEMENT
OF
CHAIRMAN BRAD MILLER
Welcome to our hearing this afternoon on something most of us have never heard
of at all, or promptly forgot after our test on the Periodic Table in high school chemistry. Today we will be discussing rare earth elements, which arent really all that
rare. Rare earth elements are crucial to making the magnets and batteries needed
for the energy industry of the 21st Century. With a little of one of these elements
you can get a smaller, more powerful magnet, or an aircraft engine that operates
at higher temperatures or a fiber-optic cable that can carry your phone call much
greater distances.
The United States, not so long ago, was the world leader in producing and exporting rare earths. Today, China is the worlds leader. Were having this hearing in
part to recognize that the Chinese have some different ideas about how to get the
greatest benefit from this suddenly-valuable commodity beyond simply digging it up
and selling it to those who want to use it in their high-tech manufacturing. China
appears to view rare earths as one of the incentives they can offer a technology firm
scouting for a new plant location. How do we compete in attracting and retaining
manufacturing firms that need access to rare earth elements in light of Chinas current near monopoly, and their willingness to use their monopoly power to our disadvantage?
The most immediate step would be to get some competition back into the supply
of rare earths. One of our witnesses, Mr. Mark Smith, is proposing to do just that.
His company owns a mine that could produce many rare earth elements if it were
to reopen. He will describe today not only what it will take to restart the mine, but
also his intent to augment Americas capability to produce the magnets needed for
electrical generators in wind turbines. From what he has told us in preparation for
the hearing, hes found it hard to get help at making his vision a reality. If we intend to rebuild Americas capability to supply its own needs in rare earth materials,
if we intend to foster a home-grown capability to make the devices that provide
wind energy, we cant succeed unless he and others like him succeed.
Further, are we investing enough in research looking into ways to recover and recycle these materials and looking for alternatives or synthetic options? Are there efficiencies that could be gained in the use of rare earth materials? For example, if
you work with rare earths on the nanoscale level, could you get the same improvements in material performance using micrograms where today you need kilograms?
There arent a lot of places where people are currently working to answer these
questions even as the answers could go far in helping America compete in the alternative energy technology industries springing up around the globe.
4 See Title II of Public Law 98373, the National Critical Materials Act of 1984; enacted July
31, 1984.
5 See Executive Order 12881; November 23, 1993 (58 Fed. Reg. 226, pp. 6249162492).
15
This is not the first time the Committee has wrestled with rare earth and critical
materials issues.
Our Committee established a national policy in minerals and materials three decades ago. That 1980 law required a continuing assessment of mineral and materials
markets to alert us to looming problems such as supply disruptions, price spikes
and the like.
Four years later we followed up by establishing the Critical Materials Council to
assure that someone was minding the store. However, you wont find the Critical
Materials Council in the White House organization chart today; it disappeared into
the National Science and Technology Council in 1993 and high level attention to
rare earths, and other materials, fell away as a priority.
While preparing for this hearing, we have learned that the Office of Science and
Technology Policy has recently organized a new interagency committee to respond
to our rare earth problems. An obvious question arises: if the Critical Materials
Council had been maintained might we be in a better position to protect our nations
interests in a robust rare earths industry? How can we reverse the result of that
history of neglect?
The Subcommittee thanks the witnesses for helping us address these issues and
I anticipate an interesting discussion later. I now recognize Dr. Broun, our Ranking
Member, for his opening remarks.
Chairman MILLER. I should let everyone be on notice that the

rule in this Subcommittee is that current Members of the Committee can take credit for all the work of our predecessors, but we
get none of the blame for any mistakes that they have made.
I now recognize Dr. Broun, our Ranking Member, for his opening
statement.
Mr. BROUN. Thank you, Mr. Chairman. Let me welcome our witnesses here today, and I thank you all for participating.
The topic of todays hearing, Rare Earth Minerals, is timely and
important. Rare earths are slated to play an increasingly important
role as we seek to meet our future energy needs, to remain competitive in the international marketplace and to continue to defend
our Nation. Rare earths are essential elements in renewable technologies, such as wind turbine magnets, compact fluorescent light
bulbs and hybrid vehicle batteries. They are also used in technologies critical to national security like lasers, aircraft engines,
and fiber optics. After the closure of the Mountain Pass Mine in the
1990s, the United States became dependent upon foreign sources
for rare earths with China currently producing roughly 95 percent
of the worlds supply. They have created a near monopoly and are
actively exploiting that advantage.
While China recently eased its export quotas for rare earths, over
the past three years, they have steadily cut export quotas saying
they need additional supplies to develop their own domestic clean
energy in high-tech sectors.
I hope todays hearing will call attention to the current state of
dependence that our Nation finds itself in. We have assembled an
experienced panel to provide insight into how we can ensure that
we have access to rare earths in the future. What industrial information is needed to guarantee continued availability of critical
minerals, what role the Federal Government should play, and what
further research and development needs to be done in that area.
With that, Mr. Chairman, I yield back my time so that we can
hear from this esteemed panel.
[The prepared statement of Mr. Broun follows:]
PREPARED STATEMENT
Thank you Mr. Chairman.
OF
REPRESENTATIVE PAUL C. BROUN
16
Let me welcome our witnesses here today and thank them for appearing.
The topic of todays hearingRare Earth Mineralsis timely and important. Rare
Earths are slated to play an increasingly important role as we seek to meet our future energy needs, remain competitive in the international marketplace, and continue to defend our Nation.
Rare Earth Minerals are essential elements in renewable technologies such as
wind turbine magnets, compact fluorescent light bulbs, and hybrid vehicle batteries.
They are also used in technologies critical to national security like lasers, aircraft
engines, and fiber-optics.
After the closure of the Mountain Pass mine in the 90s, the United States became
dependent upon foreign sources for rare earths. With China currently producing
roughly 95% of the worlds supply, theyve created a near monopoly and are actively
exploiting that advantage. While China recently eased its export quotas for Rare
Earths, over the past three years they have steadily cut export quotas, saying they
need additional supplies to develop their own domestic clean energy and high-tech
sectors. I hope todays hearing will call attention to the current state of dependence
our nation finds itself in.
We have assembled a superb panel to provide insight into how we can ensure that
we have access to Rare Earths in the future, what industrial information is needed
to guarantee continued availability of critical minerals, what role the Federal Government should play, and what further research and development needs to be done
in the area.
With that Mr. Chairman, I yield back my time so that we can hear from this esteemed panel.
Chairman MILLER. Thank you, Dr. Broun. At the time of Mr.

Gordons opening statement and mine, China controlled 90 percent
of rare earths, and by the time of Dr. Brouns, it had grown to 95
percent. That should give us a sense of the urgency with which we
need to address this issue.
I now ask unanimous consent for any additional opening statements submitted by members to be included in the record. Without
objection, that is so ordered.
It is now my pleasure to introduce our witnesses. First, Dr. Stephen Freiman is currently a member of the National Research
Council Committee on Critical Mineral Impacts on the U.S. Economy. Dr. Steve Duclos is Chief Scientist and Manager of Material
Sustainability at General Electric Global Research. Dr. Duclos
managed GEs optical materials laboratory where he worked to develop advanced materials. Dr. Karl Gschneidner is Anson Marston
Distinguished Professor at the Department of Materials Science
and Engineering at Iowa State University and a Senior Metallurgist at the Ames National Laboratory. And Mr. Terence Stewart
is a managing partner at the law firm of Stewart and Stewart, specializing in international trade and customs issues.
I would now like to recognize the gentleman from Colorado, Mr.
Coffman, to introduce our final witness today. Mr. Coffman?
Mr. COFFMAN. Thank you, Mr. Chairman. Chairman Miller and
Ranking Member Broun, thank you for allowing me to introduce
Mark Smith today. I first became aware of the looming crisis of the
rare earth mineral supply and manufacturing capability last year.
In my subsequent study on the problem, I quickly learned that the
greatest concentration of rare earth minerals, now known as the
Mountain Pass Mine in California, and the company working that
mine is headquartered in my district, in Greenwood Village, Colorado. That company is Molycorp Minerals, Limited Liability Corporation, and I spoke about the rare earth supply chain problem
with Chief Executive Officer Mark Smith.
17
Prior to Molycorp, Mr. Smith was the President and Chief Executive Officer of Chevron Mining, Incorporated. Mr. Smith was appointed President and Chief Executive Officer in April 2006. Prior
to this appointment, Mr. Smith was the Vice President for Unocal
Corporation where he was responsible for managing the real estate
remediation and mining divisions. Mr. Smith worked for Unocal for
over 22 years.
Mr. Smith received his Bachelor of Science degree in agricultural
engineering from Colorado State University in 1981 and his Juris
Doctorate from Western State University College of Law in 1990.
He is a registered professional engineer and an active member of
the State Bar of California and Colorado. Mr. Smith and his wife
live in Denver, Colorado.
As he will testify, the U.S. has significant rare earth resources
at Molycorps rare earth mine at Mountain Pass, California. However, the U.S. no longer possesses the manufacturing capability to
convert its raw rare earth minerals into the critical metals and
magnets that power so many key technologies. I hope we can work
with industry through knowledgeable leaders such as Mr. Smith to
address the crucial need for rare earth mineral supply and industrial capability.
Mr. Chairman, I yield back.
Chairman MILLER. Thank you, Mr. Coffman. As our witnesses
should know, you will each have five minutes for your spoken testimony, your oral testimony. Your written testimony will be included
in the record for the hearing. When all have completed your spoken
testimony, we will begin with questions, and each member will
have five minutes to question the panel.
This committee is a Committee on Investigations and Oversight,
although this hearing is more really like a legislative than investigative hearing, but it is our practice to receive testimony under
oath. Do any of you have any objection to taking an oath? The
record should reflect that all nodded in the negative, they had no
objection.
You also have the right to be represented by counsel. Do any of
you have counsel here? And the record should reflect that all
nodded in the negative with the exception of Mr. Smith who said
no. And we ask you these questions to put you at ease.
If you would now please stand and raise your right hand. Do you
swear to tell the truth and nothing but the truth? The record
should reflect that all the witnesses said yes and have taken the
oath. Let us now begin with Dr. Stephen Freiman. Dr. Freiman,
you are recognized for five minutes.
STATEMENT OF DR. STEPHEN FREIMAN, PRESIDENT,
FREIMAN CONSULTING, INC.
Dr. FREIMAN. Thank you, Mr. Chairman. I retired as Deputy Director of the Materials Science Engineering Laboratory at the National Institutes of Standards and Technology to start a small consulting business. I served on the Committee on Critical Mineral
Impacts on the U.S. Economy of the National Research Council and
am testifying in place of the Committee Chairman, Dr. Roderick
Eggert, who could not be present today.
18
As you observed, mineral-based materials are ubiquitousaluminum in jet aircraft, steel in bridges and buildings, and lead in
batteries to name but a few examples.
[The information follows:]
The slide that you see illustrates the expanded use of new minerals over the years in important technologies such as computer
chips.
The emergence of new technologies and engineered materials creates the prospect of rapid increases in demand for some minerals
previously used in relatively small quantities in a small number of
applications such as lithium in automotive batteries, rare earth elements in permanent magnets and compact fluorescent light bulbs
and indium and tellurium in photovoltaic solar cells.
At the same time the supplies of some minerals seemingly are
becoming increasingly fragile due to more fragmented supply
chains, increased U.S. import dependence, export restrictions by
some nations on primary raw materials, and increased industry
concentration.
It was in this light that the Standing Committee on Earth Resources of the National Research Council initiated a study and established an ad hoc committee to examine the range of issues important in understanding the evolving role of non-fuel minerals in
the U.S. economy and the potential impediments to the supplies of
these minerals to domestic users. The U.S. Geological Survey and
the National Mining Association sponsored the study, the findings
of which appear in the volume Minerals, Critical Minerals, and the
U.S. Economy.6
6 National Research Council. Committee on Critical Mineral Impacts on the U.S. Economy.
Minerals, Critical Minerals, and the U.S. Economy (Washington: National Academy Press,
2008).
19
In my testimony today, I highlight two parts of the report, its analytical framework and empirical findings and its recommendations.
The analytical framework begins by defining critical minerals as
those that are both essential in usethat is, difficult to substitute
away from, and subject to supply risk. The idea is illustrated in the
slide that you see, a criticality matrix. The horizontal axis represents the degree of supply risk associated with a particular mineral, which increases from left to right. Supply risk is higher, the
greater the concentration of production in a small number of companies, mines, et cetera. The smaller the existing market, the
greater the reliance on byproduct production of a mineral and the
smaller the reliance on post-consumer scrap as the source of supply.
Import dependence by itself is a poor indicator of supply risk.
Rather it is import dependence combined with concentrated production and perhaps geopolitical risk, the first of the four factors
above, that lead to supply risk.
In the next slide, the hypothetical mineral A is subject to greater

supply than mineral B. So the overall risk of criticality increases
20
as one moves from the lower-left to the upper-right corner of the
diagram.
Implementing the framework requires specifying a prospective
timeframe. From the perspective of a mineral-using company, for
example, will likely be different than that of a national government. The degree of criticality in the short to medium term, one
to a few years, up to a decade, depends on existing technologies
and production facilities. Substituting one material for another in
a product typically is difficult in the short term, due to constraints
imposed by existing product designs and production equipment. In
contrast, over the longer term, the degree of criticality depends
much more importantly on technological innovation and investments in new technology and equipment on both the demand side
and the supply side.
Taking the perspective of the U.S. economy overall and in the
short to medium term, the Committee evaluated 11 minerals or
mineral families. It did not assess the criticality of all important
non-fuel minerals due to limits on time and resources.
Slide three summarizes the Committees evaluations, and I am

sure you have trouble seeing it, but of the 11 minerals those
deemed most critical, those that plot in the upper-right portion of
the diagram, are indium, magnesiummanganese, ratherniobium, platinum group metals and rare earth elements.
A final point: criticality is dynamic. A critical mineral today may
become less critical either because substitutes of new sources of
supply are developed. Conversely, a less critical mineral today may
21
become more critical in the future because of a new use or change
in supply risk. Such could be the case with lithium which the committee did not evaluate as one of the more non-critical minerals.
It should be recognized, however, that this analysis tool can be
no better than the quality and timeliness of the date used to create
it. And in the interest of time, the committee had several recommendations which you have in your written document, and I
dont think I need to read them to you. I would just say, however,
that my personal opinion that research and development in topics,
such as recycling of specialty materials used in small quantities in
emerging uses as well as enhanced coordination of research efforts
between departments and agencies as suggested in the National
Materials and Minerals Policy Research and Development Act of
1980 would also be very beneficial.
Thank you for allowing me to testify today, and I will be happy
to answer any questions the Subcommittee may have.
[The prepared statement of Dr. Freiman follows:]
PREPARED STATEMENT
OF
STEPHEN FREIMAN
Good afternoon, Mr. Chairman and members of the Committee. My name is Dr.
Stephen Freiman. A few years ago I retired as Deputy Director of the Materials
Science and Engineering Laboratory at the National Institute of Standards and
Technology to start a small consulting business. I served on the Committee on Critical Mineral Impacts on the U.S. Economy of the National Research Council (NRC).
The Research Council is the operating arm of the National Academy of Sciences, National Academy of Engineering, and the Institute of Medicine of the National Academies, chartered by Congress in 1 863 to advise the government on matters of
science and technology.
Mineral-based materials are ubiquitousaluminum in jet aircraft; steel in bridges
and buildings, and lead in batteries, to name but a few examples. The emergence
of new technologies and engineered materials creates the prospect of rapid increases
in demand for some minerals previously used in relatively small quantities in a
small number of applicationssuch as lithium in automotive batteries, rare-earth
elements in permanent magnets and compact-fluorescent light bulbs, and indium
and tellurium in photovoltaic solar cells. At the same time, the supplies of some
minerals seemingly are becoming increasingly fragile due to more fragmented supply chains, increased-U.S. import dependence, export restrictions by some nations
on primary raw materials, and increased industry concentration.
It was in this light that the U.S. Geological Survey (USGS) and the National Mining Association sponsored a National Research Council study to examine the range
of issues important in understanding the evolving role of nonfuel minerals in the
U.S. economy and the potential impediments to the supplies of these minerals to
domestic users. The study was conducted under the purview of the NRCs standing
Committee on Earth Resources. The findings of the study are contained in the volume Minerals, Critical Minerals, and the U.S. Economy (National Academies Press,
2008).
In my testimony today, I highlight two parts of the report: its analytical framework and empirical findings, and its recommendations. In addition, I provide answers to the questions you posed in your letter of invitation to me.
Analytical Framework
The analytical framework begins by defining critical minerals as those that are
both essential in use (difficult to substitute away from) and subject to supply risk.
The idea is illustrated in Figure 1, a criticality matrix. The horizontal axis represents the degree of supply risk associated with a particular mineral, which increases from left to right. Supply risk is higher (1) the greater the concentration of
production in a small number of mines, companies, or countries, (2) the smaller the
existing market (the more vulnerable a market is to being overwhelmed by a rapid
increase in demand due to a large new application), (3) the greater the reliance on
byproduct production of a mineral (because the supply of a byproduct is determined
largely by the economic attractiveness of the associated main product), and (4) the
smaller the reliance on post-consumer scrap as a source of supply. Import depend-
22
ence, by itself, is a poor indicator of supply risk; rather it is import dependence combined with concentrated production and perhaps geopolitical risk (the first of the
four factors above) that lead to supply risk. In Figure I, the hypothetical mineral
A is subject to greater supply risk than mineral B.
Figure I. The Criticality Matrix. Source: Minerals, Critical Minerals, and the U.S.
Economy (National Academies Press, 2008).
The vertical axis represents the impact of a supply restriction, which increases
from bottom to top. Broadly speaking, the impact of a restriction relates directly to
the ease or difficulty of substituting away from the mineral in question. The more
difficult substitution is, the greater the impact of a restriction (and vice versa). The
impact of a supply restriction can take two possible forms: higher costs for users
(and potentially lower profitability), or physical unavailability (and a no-build situation for users).1
The overall degree of criticality increases as one moves from the lower-left to the
upper-right corner of the diagram. The hypothetical mineral A would be relatively
more critical than mineral B.
Implementing the framework requires specifying a perspective and time frame.
The perspective of a mineral-using company, for example, will likely be different
than that of a national government. The degree of criticality in the short to medium
term (one or a few years, up to a decade) depends on existing technologies and production facilities. Substituting one material for another in a product typically is difficult in the short term due to constraints imposed by existing product designs and
production equipment. Short-term supply risks are a function of the nature and location of existing production. In contrast, over the longer term (a decade or more),
the degree of criticality depends much more importantly on technological innovation
1 When considering security of petroleum supplies, rather than minerals, the primary concern
is costs and resulting impacts on the macroeconomy (the level of economic output). The mineral
and mineral-using sectors, in contrast, are much smaller, and thus we are not concerned about
macroeconomic effects of restricted mineral supplies. Rather the concern is both about higher
input costs for mineral users and, in some cases, physical unavailability of an important input.
23
and investments in new technology and equipment on both the demand side (material substitution) and the supply side (mineral exploration, mining and mineral
processing, and associated technologies).
Taking the perspective of the U.S. economy overall and in the short to medium
term, the committee evaluated eleven minerals or mineral families. It did not assess
the criticality of all important nonfuel minerals due to limits on time and resources.
Figure 2 summarizes the committees evaluations. Of the eleven minerals, those
deemed most criticalthat is, they plot in the upper-right portion of the diagram
are indium, manganese, niobium, platinum-group metals, and rare-earth elements.
Figure 2. Criticality Evaluations for Selected Minerals or Mineral Families.

Source: Minerals, Critical Minerals, and the U.S. Economy (National Academies
Press, 2008).
A final point: criticality is dynamic. A critical mineral today may become less critical either because substitutes or new sources of supply are developed. Conversely,
a less-critical mineral today may become more critical in the future because of a
new use or a change in supply risk. Such could be the case with lithium, which the
committee did not evaluate as one of the more-critical minerals in its analysis two
years ago (Figure 2); if demand for lithium in batteries increases significantly and
new sources of supply are in politically risky locations, then lithium could plot in
the more-critical region of the figure in the future.
Recommendations
The committee made three recommendations, which I quote below:
1. The Federal Government should enhance the types of data and information
it collects, disseminates, and analyzes on minerals and mineral products, especially as these data and information relate to minerals and mineral products that are or may become critical.
2. The Federal Government should continue to carry out the necessary function
of collecting, disseminating, and analyzing mineral data and information.
The USGS Minerals Information Team, or whatever Federal unit might later
be assigned these responsibilities, should have greater authority and autonomy than at present. It also should have sufficient resources to carry out its
mandate, which would be broader than the Minerals Information Teams current mandate if the committees recommendations are adopted. It should establish formal mechanisms for communicating with users, government and
nongovernmental organizations or institutes, and the private sector on the
24
types and quality of data and information it collects, disseminates, and analyzes. It should be organized to have the flexibility to collect, disseminate,
and analyze additional, nonbasic data. and information, in consultation with
users, as specific minerals and mineral products become relatively more critical over time (and vice versa).
3. Federal agencies, including the National Science Foundation, Department of
the Interior (including the USGS), Department of Defense, Department of
Energy, and Department of Commerce, should develop and fund activities,
including basic science and policy research, to encourage U.S. innovation in
the area of critical minerals and materials and to enhance understanding of
global mineral availability and use.
Questions from the Subcommittee on Investigations and Oversight
What are the major gaps in current Federal policy for minerals and materials?
The committee report does not address this broad question. It does identify gaps
in minerals information and recommends enhanced collection, dissemination and
analysis of those parts of the mineral life cycle that are under-represented at
present including: reserves and subeconomic resources, byproduct and coproduct primary production, stocks and flows of materials available for recycling, in-use stocks,
material flows, and materials embodied in internationally traded goods. The committee report recommends periodic analysis of mineral criticality over a range of
minerals.
Which aspects of research and development in minerals and materials require enhanced Federal support, and what form should this support take?
See Recommendation 3 above. As part of its detailed discussion of this recommendation, the committee report also recommends funding scientific, technical,
and social-scientific research on the entire mineral life cycle. It recommends cooperative programs involving academic organizations, industry, and government to enhance education and applied research.
How should the Federal Government improve the collection of information on minerals and materials markets?
See Recommendation 2 above. As part of its more detailed discussion of this recommendation, the committee report suggests that the Federal Government consider
the Energy Information Administration, which has status as a principal statistical
agency, as a potential model for minerals information, dissemination, and analysis.
Whatever agency or unit is responsible for minerals information, it needs greater
autonomy and authority than at present.
Facing dynamic changes in supply and demand for particular minerals and materials in a global economy, what are the most useful contributions the Federal
Government can employ to assist industry?
My personal opinion is that Federal. minerals and materials policy should focus
on: (1) encouraging undistorted international trade, (2) ensuring that policies and
procedures for domestic mineral development appropriately integrate commercial,
environmental, and social considerations, (3) facilitating provision of information on
which private and public decisions are made, and (4) facilitating research and development, including on recycling of specialty materials used in small quantities in
emerging uses.
Thank you for the opportunity to testify today. I would be happy to address any
questions the subcommittee may have.
BIOGRAPHY
FOR
STEPHEN FREIMAN
Dr. Freiman graduated from the Georgia Institute of Technology with a B. ChE.
and a M. S. in Metallurgy. After receiving a Ph.D. in Materials Science and Engineering from the University of Florida in 1968, Dr. Freiman worked at the IIT Research Institute and the Naval Research Laboratory. He joined NIST (then NBS)
in 1978. From 1992 to 2002 Dr. Freiman served as Chief of the Ceramics Division
at NIST. Prior to his leaving NIST in 2006 to start a consulting business (Freiman
Consulting Inc.), Dr. Stephen Freiman served for four years as Deputy Director of
the Materials Science and Engineering.
Dr. Freiman has published over 200 scientific papers focusing primarily on the
mechanical properties of brittle materials. He was the first Chairman of the ASTM
25
Subcommittee addressing brittle fracture and a past Chair of the Steering Committee of the Versailles Project for Advanced Materials and Standards. Dr. Freiman
served as Treasurer, and President of the American Ceramic Society, and is a Fellow and Distinguished Life Member of the Society.
Chairman MILLER. Thank you, Dr. Freiman. Dr. Steven Duclos.

STATEMENT OF DR. STEVEN J. DUCLOS, CHIEF SCIENTIST
AND MANAGER, MATERIAL SUSTAINABILITY, GENERAL
ELECTRIC GLOBAL RESEARCH
Dr. DUCLOS. Chairman Miller, Ranking Member Broun, and

Members of the Committee, it is my privilege to share with you
GEs thoughts on how we manage shortages of materials critical to
our manufacturing and what steps the government can take to help
industry minimize the risk associated with these shortages.
This hearing addresses an issue that is critical to the future
wellbeing of U.S. manufacturing. Without development of new supplies and focused research in materials and manufacturing, such
supply challenges could undermine efforts to meet the Nations future needs in defense, energy, health care and transportation.
I would like to share with you GEs strategy to address its material needs as well as outline a series of recommendations for how
the government can strengthen its support of industry in this area.
GE uses 70 of the first 83 elements on the periodic table. As
Chief Scientist and Manager of Material Sustainability at GE Global Research, is it my job to understand the latest trends in materials and to work with our businesses to manage our materials
needs in a sustainable way.
To evaluate risks associated with material shortages, GE uses a
modification of the assessment tool developed by the National Research Council in 2008. Risks are quantified by element in two categories, price and supply risk and impact of a restricted supply to
GE. Those elements deemed to have high risk in both categories
are identified as materials needing further study and a detailed
plan to mitigate supply risks. For this assessment, we extensively
used data from the U.S. Geological Surveys mineral information
team as well as in-house knowledge of supply dynamics.
There is a broad spectrum of strategies that can be implemented
to minimize the risk of those elements identified as being at high
risk. These include, number one, improvements in the global supply chain, including the development of alternate sources, longterm supply agreements and development of inventory of materials.
Number two, improvements of material utilization in manufacturing and reduction of manufacturing waste. Number three, development of recycling technologies that extract at-risk elements from
both end-of-life products and manufacturing yield loss. This includes the design of products that are more easily recycled and
service which improves materials service life. Number four, development of materials and systems technologies that either greatly
reduce or even eliminate the need for the element altogether. Several examples of these are discussed in my written testimony
where GE has successfully taken this approach. This includes the
replacement of helium with boron in neutron detectors and the reduction by a factor of two in the use of rhenium content in superalloys for our jet engines, a development that leveraged past re-
26
search programs supported by DARPA, the Air Force, the Navy
and NASA.
And finally, number five, reassessment of the entire system.
Often more than one technology can address a customers need,
and each will use a different subset of the periodic table. The solution to the materials constraint can involve using a new or alternate technology. An example is the development of energy-efficient
LED lighting technologies as supported by the Department of Energy that offer a 70-times reduction in the use of rare earth elements for lighting.
Attention needs to be paid to all five of these solutions outlined
above. The shorter term sourcing and manufacturing solutions are
critical to buy time for the more optimal recycling and material
substitution solutions. They tend to be longer term, higher risk and
require risk mitigation strategies involving parallel paths. The government can help by enabling public/private collaborations that
provide both materials understanding and resources that enable
these material substitution approaches. Anticipated growth in the
use of rare earths for efficient energy and transportation technologies mandates that we develop the full range of five solutions
outlined above.
We make the following recommendations for the government to
strengthen its support of efforts to minimize the increasing risk associated with material shortages.
Number one, appoint a lead agency with ownership of early risk
assessment and authority to fund the five solutions. The government needs to enhance its ability to monitor, assess and coordinate
a response to identified issue.
Number two, sustained funding for research focusing on material
substitutions to lay the foundation upon which solutions are developed. Collaborative efforts between academia, government laboratories and industry will help ensure that manufacturing compatible
solutions are available to industry in time to avert disruptions in
U.S. manufacturing.
Number three, with global economic growth resulting in increased pressure on material stocks, it is imperative that there be
a sustained support of the government to develop the full set of solutions outlined in this testimony, new material sources, recycling
technologies, manufacturing efficiency, alternate materials and new
system solutions.
In closing, we believe a more coordinated approach and sustained
investment from the government in materials and manufacturing
technologies is needed to provide industry with the flexibility that
makes U.S. manufacturing less vulnerable to material shortages.
Thank you for your time, and I look forward to answering your
questions.
[The prepared statement of Dr. Duclos follows:]
PREPARED STATEMENT
OF
STEVEN J. DUCLOS
Introduction
Chairman Miller and members of the Committee, it is a privilege to share with
you GEs thoughts on how we manage shortages of precious materials and commodities critical to our manufacturing operations and what steps the Federal Government can take to help industry minimize the risks and issues associated with these
shortages.
27
Background
GE is a diversified global infrastructure, finance, and media company that provides a wide array of products to meet the worlds essential needs. From energy and
water to transportation and healthcare, we are driving advanced technology and
product solutions in key industries central to providing a cleaner, more sustainable
future for our nation and the world.
At the core of every GE product are the materials that make up that product. To
put GEs material usage in perspective, we use at least 70 of the first 83 elements
listed in the Periodic Table of Elements. In actual dollars, we spend $40 billion annually on materials. 10% of this is for the direct purchase of metals and alloys. In
the specific case of the rare earth elements, we use these elements in our
Healthcare, Lighting, Energy, Motors, and Transportation products.
Nowhere in the company is our understanding of materials more evident than at
GE Global Research, the hub of technology development for all of GEs businesses.
Located just outside of Albany NY, GE scientists and engineers have been responsible for major material breakthroughs throughout our 110-year history. One of GEs
earliest research pioneers, William Coolidge, discovered a new filament material,
based on ductile tungsten, in 1909, which enabled us to bring the light bulb to every
home. Just four years later, he developed a safe x-ray tube design for medical imaging. In 1953, GE scientist Daniel Fox developed LEXAN plastic, which is used in
todays CDs and DVDs. It was even used in the helmets that U.S. astronauts Neil
Armstrong and Buzz Aldrin wore when they walked on the moon. More recently,
GE scientists created a unique scintillator material, called Gemstone, which is the
key component in GE Healthcares newest High-Definition Computed Tomography
(CT) medical imaging scanner that enables faster and higher resolution imaging.
Because materials are so fundamental to everything we do as a company, we are
constantly watching, evaluating, and anticipating supply changes with respect to
materials that are vital to GEs business interests. On the proactive side, we invest
a great deal of time and resources to develop new materials and processes that help
reduce our dependence on any given material and increase our flexibility in product
design choices.
We have more than 35,000 scientists and engineers working for GE in the U.S.
and around the globe, with extensive expertise in materials development, system design, and manufacturing. As Chief Scientist and Manager of Material Sustainability
at GE Global Research, its my job to understand the latest trends in materials and
to help identify and support new R&D projects with our businesses to manage our
needs in a sustainable way.
Chairman Miller, I commend you for convening this hearing to discuss an issue
that is vital to the future well being of U.S. manufacturing. Without development
of new supplies and more focused research in materials and manufacturing, such
supply challenges could seriously undermine efforts to meet the nations future
needs in energy, healthcare, and transportation. What I would like to do now is
share with you GEs strategy to address its materials needs, as well as outline a
series of recommendations and indeed, a framework, for how the Federal Government can strengthen its support of academia, government, and industry in this area.
Comments and Recommendations
The process that GE uses to evaluate the risks associated with material shortages
is a modification of an assessment tool developed by the National Research Council
in 2008. Risks are quantified element by element in two categories: Price and Supply Risk, and Impact of a Restricted Supply on GE. Those elements deemed to
have high risk in both categories are identified as materials needing further study
and a detailed plan to mitigate supply risks. The Price and Supply Risk category
includes an assessment of demand and supply dynamics, price volatility, geopolitics,
and co-production. Here we extensively use data from the U.S. Geological Surveys
Minerals Information Team, as well as in-house knowledge of supply dynamics and
current and future uses of the element. The Impact to GE category includes an
assessment of our volume of usage compared to the world supply, criticality to products, and impact on revenue of products containing the element. While we find this
approach adequate at present, we are working with researchers at Yale University
who are in the process of developing a more rigorous methodology for assessing the
criticality of metals. Through these collaborations, we anticipate being able to predict with much greater confidence the level of criticality of particular elements for
GEs uses.
Once an element is identified as high risk, a comprehensive strategy is developed
to reduce this risk. Such a strategy can include improvements in the supply chain,
improvements in manufacturing efficiency, as well as research and development into
28
new materials and recycling opportunities. Often, a combination of several of these
may need to be implemented.
Improvements in the global supply chain can involve the development of alternate
sources, as well as the development of long-term supply agreements that allow suppliers a better understanding of our future needs. In addition, for elements that are
environmentally stable, we can inventory materials in order to mitigate short-term
supply issues.
Improvements in manufacturing technologies can also be developed. In many
cases where a manufacturing process was designed during a time when the availability of a raw material was not a concern, alternate processes can be developed
and implemented that greatly improve its material utilization. Development of nearnet-shape manufacturing technologies and implementation of recycling programs to
recover waste materials from a manufacturing line are two examples of improvements than can be made in material utilization.
An optimal solution is to develop technology that either greatly reduces the use
of the at-risk element or eliminates the need for the element altogether. While there
are cases where the properties imparted by the element are uniquely suitable to a
particular application, I can cite many examples where GE has been able to invent
alternate materials, or use already existing alternate materials to greatly minimize
our risk. At times this may require a redesign of the system utilizing the material
to compensate for the modified properties of the substitute material. Lets look at
a few illustrative recent examples.
The first involves Helium-3, a gaseous isotope of Helium used by GE Energys
Reuter Stokes business in building neutron sensors for detecting special nuclear materials at the nations ports and borders. The supply of Helium-3 has been diminishing since 2001 due to a simultaneous increase in need for neutron detection for
security, and reduced availability as Helium-3 production has dwindled. GE has addressed this problem in two ways. The first was to develop the capability to recover,
purify and reuse the Helium-3 from detectors removed from decommissioned equipment. The second was the accelerated development of Boron-10 based detectors that
eliminate the need for Helium-3 in Radiation Portal Monitors. DNDO and the Pacific Northwest National Lab are currently evaluating these new detectors.
A second example involves Rhenium, an element used at several percent in super
alloys for high efficiency aircraft engines and electricity generating turbines. Faced
with a six-fold price increase during a three-year stretch from 2005 to 2008 and concerns that its supply would limit our ability to produce our engines, GE embarked
on multi-year research programs to develop the capability of recycling manufacturing scrap and end-of-life components. A significant materials development effort
was also undertaken to develop and certify new alloys that require only one-half the
amount of Rhenium, as well as no Rhenium at all. This development leveraged past
research and development programs supported by DARPA, the Air Force, the Navy,
and NASA. The Department of Defense supported qualification of our reduced Rhenium engine components for their applications.
By developing alternate materials, we created greater design flexibility that can
be critical to overcoming material availability constraints. But pursuing this path
is not easy and presents significant challenges that need to be addressed. Because
the materials development and certification process takes several years, executing
these solutions requires advanced warning of impending problems. For this reason,
having shorter term sourcing and manufacturing solutions is critical in order to
buy time for the longer term solutions to come to fruition. In addition, such material development projects tend to be higher risk and require risk mitigation strategies and parallel paths. The Federal Government can help by enabling public-private collaborations that provide both the materials understanding and the resources
to attempt higher risk approaches. Both are required to increase our chances of success in minimizing the use of a given element.
Another approach to minimizing the use of an element over the long term is to
assure that as much life as possible is obtained from the parts and systems that
contain these materials. Designing in serviceability of such parts reduces the need
for additional material for replacement parts. The basic understanding of life-limiting materials degradation mechanisms can be critical to extending the useful life
of parts, particularly those exposed to extreme conditions. It is these parts that tend
to be made of the most sophisticated materials, often times containing scarce raw
materials.
A complete solution often requires a reassessment of the entire system that uses
a raw material that is at risk. Often, more than one technology can address a customers need. Each of these technologies will use a certain subset of the periodic
tableand the solution to the raw material constraint may involve using a new or
alternate technology. Efficient lighting systems provide an excellent example of this
29
type of approach. Linear fluorescent lamps use several rare earth elements. In fact,
they are one of the largest consumers of Terbium, a rare earth element that along
with Dysprosium is also used to improve the performance of high-strength permanent magnets. Light emitting diodes (LEDs), a new lighting technology whose development is being supported by the Department of Energy, uses roughly one-hundredth the amount of rare earth material per unit of luminosity, and no Terbium.
Organic light emitting diodes (OLEDs), an even more advanced lighting technology,
promises to use no rare earth elements at all. In order to buy time for the LED
and OLED technologies to mature, optimization of rare earth usage in current fluorescent lamps can also be considered. This example shows how a systems approach
can minimize the risk of raw materials constraints.
In addition to high efficiency lighting, GE uses rare earth elements in our medical
imaging systems and in wind turbine generators. Rare earth permanent magnets
are a key technology in high power density motors. These motors are vital to the
nations vision for the electrification of transportation, including automobiles, aircraft, locomotives, and large off-road vehicles. The anticipated growth in the use of
permanent magnets and other rare earth based materials for efficient energy technologies mandates that we develop a broad base solution to possible raw material
shortages. These solutions require the development of the sourcing, manufacturing
efficiency, recycling, and material substitution approaches outlined above.
Based on our past experience I would like to emphasize the following aspects that
are important to consider when addressing material constraints:
1) Early identification of the issuetechnical development of a complete solution can be hampered by not having the time required to develop some of
the longer term solutions.
2) Material understanding is criticalwith a focus on those elements identified
as being at risk, the understanding of materials and chemical sciences enable acceleration of the most complete solutions around substitution. Focused
research on viable approaches to substitution and usage minimization greatly increases the suite of options from which solutions can be selected.
3) Each element is different and some problems are easier to solve than otherstypically a unique solution will be needed for each element and each
use of that element. While basic understanding provides a foundation from
which solutions can be developed, it is important that each solution be compatible with real life manufacturing and system design. A specific elemental
restriction can be easier to solve if it involves few applications and has a
greater flexibility of supply. Future raw materials issues will likely have increased complexity as they become based on global shortages of minerals
that are more broadly used throughout society.
Given increasing challenges around the sustainability of materials, it will be critical for the Federal Government to strengthen its support of efforts to minimize the
risks and issues associated with material shortages. Based on the discussion above,
we make the following recommendations for the Federal Government:
1) Appoint a lead agency with ownership of early assessment and authority to
fund solutionsgiven the need for early identification of future issues, we
recommend that the government enhance its ability to monitor and assess
industrial materials supply, both short term and long term, as well as coordinate a response to identified issues. Collaborative efforts between academia,
government laboratories, and industry will help ensure that manufacturing
compatible solutions are available to industry in time to avert disruptions in
U.S. manufacturing.
2) Sustained funding for research focusing on material substitutionsFederal
Government support of materials research will be critical to laying the foundation upon which solutions are developed when materials supplies become
strained. These complex problems will require collaborative involvement of
academic and government laboratories with direct involvement of industry to
ensure solutions are manufacturable.
3) With global economic growth resulting in increased pressure on material
stocks, along with increased complexity of the needed resolutions, it is imperative that the solutions discussed in this testimony: recycling technologies,
development of alternate materials, new systems solutions, and manufacturing efficiency have sustained support. This will require investment in
long-term and high-risk research and developmentand the Federal Governments support of these will be of increasing criticality as material usage
grows globally.
30
Conclusion
In closing, we believe that a more coordinated approach and sustained level of investment from the Federal Government in materials science and manufacturing
technologies is required to accelerate new material breakthroughs that provide businesses with more flexibility and make us less vulnerable to material shortages.
Chairman Miller and Members of the Committee, thank you for your time and the
opportunity to provide our comments and recommendations.
BIOGRAPHY
FOR
STEVEN J. DUCLOS
Steven Duclos is a Chief Scientist at the General Electric Global Research Center
in Niskayuna, New York, and manages GEs Material Sustainability Initiative. The
Material Sustainability initiative addresses GEs risks in the availability and sustainability of the companys raw material supply, by developing technologies that reduce the use, support the recycling, and enable substitution of lower-risk materials.
From 2000 to 2008 Dr. Duclos managed the Optical Materials Laboratory, also at
GE GRC. The laboratory is responsible for development of advanced materials for
a broad spectrum of GE businesses, including its Lighting and Healthcare businesses. From 1994 to 2004 Dr. Duclos served on the Executive Committee of the
New York State Section of the American Physical Society. Prior to joining the GE
Global Research Center in 1991 he was a post-doc at AT&T Bell Laboratories in
Murray Hill, New Jersey.
Dr. Duclos received his B.S. degree in Physics in 1984 from Washington University in St. Louis, M.S. degree in Physics from Cornell University in Ithaca, New
York in 1987, and Ph.D. in Physics from Cornell in 1990. He is the recipient of an
AT&T Bell Laboratories Pre-doctoral Fellowship and the 1997 Albert W. Hull
Award, GE Global Researchs highest award for early career achievement.
Chairman MILLER. Thank you, Dr. Duclos. Dr. Gschneidner.

STATEMENT OF DR. KARL A. GSCHNEIDNER, JR., ANSON
MARSTON DISTINGUISHED PROFESSOR, DEPARTMENT OF
MATERIALS SCIENCE AND ENGINEERING, IOWA STATE UNIVERSITY
Dr. GSCHNEIDNER. Good afternoon, Mr. Chairman, members of

the Subcommittee, ladies and gentlemen. I am pleased to have this
opportunity to present my views on the rare earth crisis and what
can be done to alleviate this situation.
My brief responses to your questions are as follows. More detailed information will be found in my written statement.
The first question was, how has rare earth research at the Ames
Laboratory changed over time? Rare earth science and technology
at Ames Laboratory, the U.S. Department of Energy, had its beginning in World War II when Iowa State College assisted the war effort by supplying 1/3 of the uranium metal, two tons, necessary to
make the first nuclear reactor go critical at the University of Chicago in 1942. By the end of the war, two million pounds of uranium
and 600,000 pounds of thorium were produced for the Manhattan
Project.
Work on rare earths was a natural outgrowth of the war effort.
Initially there was a wide spectrum of research being carried out.
This includes separation, analytical, solid state chemistry; process,
physical and mechanical metallurgy; ceramics; and condensed matter physics. Many successes were achieved and technology was
turned over to industry, but as science matured, programmatic
changes occurred and a number of research areas were phased out.
This included separation andchemistry, process and mechanical
metallurgy, and ceramics. The remaining areas are still strong, but
the power person levels have diminished.
31
However, the establishment of the Materials Preparation Center,
a DOE Basic Energy Scientist Specialized Research Center, has alleviated some of this degradation in process metallurgy.
I would like to mention a new and exciting development, the revolutionary method of preparing neodymium master alloy to make
a neodymium-iron-boron permanent magnet. The cost of this master alloy is about half of that of neodymium. Furthermore, it is a
very green technology with no byproducts compared to conventional
processes which have byproducts which need to be disposed of in
an environmentally safe manner.
I have in my hand the second neodymium-iron-boron magnet
made which was just produced within the last month, and so they
are working with that technology.
The second question, what would be required to conduct a robust
program of basic research on rare earths? We are well-aware of the
impact of Chinese activities in the rare earth market as noted by
other invited speakers at this House hearing. In addition to forcing
the United States and rare earth permanent magnet manufacturers out of business, the country now faces a shortage of trained scientists, engineers, technicians and a lack of innovations in a hightech area which are critical to our countrys future needs.
A research center which alleviates both of these problems is the
best way to solve this rare earth crisis, an educational institute
which has a long and strong tradition of carrying out research on
all aspects of rare earth materials with a strong educational component would be an ideal situation. A National Research Center on
Rare Earths and Energy should be established with Federal and
state support, supplemented by U.S. industry as the rare earth industry revitalizes. The center would employ about 30 full-time employees. This research center would be a national resource for rare
earth science technology and applications and would provide support of research activities at other institutions via subcontracts
complementing the activities of the center.
The major emphasis of the center would be directed basic research; proprietary research paid by the organizations that request
it, would also be a part of the centers mandate. The center would
have an advisory board made up of representatives from the university, government, industry and the general public to oversee,
guide and refocus as needed the research being conducted.
I would like to suggest to this House committee they consider a
second national center on research on magnetic cooling. Cooling
below room temperature accounts for 15 percent of the total energy
consumed in the United States. Magnetic refrigeration is new, advanced, highly technical, energy efficient, green technology for cooling and climate control, for refrigerating and freezing. See Section
6.5 of my written response. It is about 20 percent more efficient as
a green technology because it eliminates harmful gases and reduces
energy consumption. If we were able to switch all cooling process
to magnetic refrigeration at once, we would reduce the energy consumption by five percent. There are a lot of hurdles that need to
be overcome, and the United States needs to put together a strong,
cohesive effort to retain our disappearing leadership in this technology by assembling a National Center for Magnetic Cooling.
32
Europe and China are moving rapidly in this area. Denmark has
assembled a Magnetic Refrigeration National Research Center at
Riso, so far the only one in the world. This center should be structured similar to what has been posed for the National Research
Center on Rare Earths and Energy. The question is, are we going
to give up our lead position and be a second-rate country or will
we lead the rest of the world? I hope and pray that our answer is
that we are going to show the world that we are number one.
Question three, how can knowledge on rare earth be transferred
to domestic companies? Knowledge is exported from research institutes, universities to industry through transfer of intellectual property and know-how. Research findings are disseminated as published articles in journals, presentations at conferences and electronic media and, if exciting enough, via news conferences, press
releases, assuming the new results are not patentable. If research
has some potential commercial value, this new information should
be made available as soon as possible after filing a patent disclosure. However, before a patent disclosure is filed, one could disseminate the results to companies that might be interested by contacting them to say, one, if they are interested, two, if they would
sign a nondisclosure agreement, and if they answer yes to both one
and two, then the information could be disclosed to them.
The second highly effective route is the transfer of the skills and
knowledge gained by university students to their industrial employers after graduation.
The fourth and last question is, how actively are U.S. scientists
researching extraction, processing, substitution, recycling, and how
is this compared to other countries? Rare earth research in the
USAand mineral extraction, rare earth separation, processing of
oxides into metal, metallic alloys, and other useful forms, substitution, recycling is virtually zero. Today, some work is carried out
at various DOE laboratories on rare earth and actinide separation
chemistry directed toward treating waste nuclear products and environmental clean-up of radioactive minerals in the soils. This research may be beneficial to improving the rare earth separation
processes on a commercial scale.
Some research at various universities might be considered to be
useful in finding substitutes for a given rare earth metal in a hightech application, but generally the particular rare earth properties
are so unique it is difficult to find another substitute. And finally,
the Chinese have two large research laboratories which have significant research and development activities that are devoted to the
above topics. They are the General Research Institute for Nonferrous Metals in Beijing, and the Baotou Research Institute of
Rare Earth in Baotou, Inner Mongolia. The former is a much larger
organization than the Baotou group, but the rare earth activity is
smaller. The Baotou Research Institute is the largest rare earth research group in the world. Baotou is located about 120 miles from
the large rare earth deposit in Inner Mongolia.
Thank you for allowing me to participate in this House committee hearing this afternoon. Thank you.
[The prepared statement of Dr. Gschneidner follows:]
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34
35
PREPARED STATEMENT
OF
KARL A. GSCHNEIDNER, JR.
1. Introduction
The Ames Laboratory (AL) is the smallest of DOEs (Department of Energy) seventeen national laboratories. It is a single-program laboratory with about 78% of
DOEs funding from the Office of Basic Energy Sciences (BES). Additional non-DOE
income of about $7M is derived from contracts, grants, Cooperative Research and
Development Agreements (CRADAs) and Work for Others (WFO) arrangements.
The AL is fully integrated with Iowa State University (ISU) and its buildings are
right on the campus and several are directly connected with ISU buildings. All AL
personnel are ISU employees, and many of the lead scientists (23) have joint appointments with various academic departments. There are about 140 scientists and
engineers, 260 graduate and undergraduate students, another 240 visiting scientists, facility users, and associates, and 180 support personnel, for a total of about
440 employees (or about 300 full-time equivalent employees) and 410 associates
(non-payroll). Of the scientific staff about 20% are directly involved in rare earth
research and development activities, including materials science, condensed matter
physics, and materials chemistry.
2. A Brief HistoryHow Did Rare Earths get to Ames?
Many persons may wonder how the Mecca of rare earths a ever ended up on the
picturesque ISU campusan oasis amongst the corn and soy bean fields of central
Iowa. The story begins in late 1930s when Frank H. Spedding was searching for
a permanent academic position after receiving his Ph.D. from the University of California in 1929 under G.N. Lewis. His Ph.D. thesis dealt with the physical properties
of rare earth materials at low temperature. He spent a number of years in temporary jobs, including two years in Europe, where he worked with several Nobel
prize winners, including Niel Bohr. In 1937, while he was occupied at Cornell University working with a future Nobel prize winner, Hans Bethe, he was offered a permanent position at ISU b as an associate professor, and he remained at ISU until
he retired in 1972. Frank Spedding was primarily a spectroscopist, but he had to
separate and purify his rare earth samples from the other rare earth elements in
order to carry out his optical measurements, which are very sensitive to the presence of other rare earth impurities. Based on his experience with rare earth (or 4f)
chemistry he was asked by A.H. Compton of the University of Chicago to work with
actinide (or 5f) materials to assist the team of physicists to build the first nuclear
reactor under the stands of Stagg Field at the University of Chicago. Spedding was
appointed the Director of Chemistry in the Chicago Project. One of the main goals
of the Project was to purify uranium from its ores and then to convert the oxide
to the metalsix tons were needed, which seemed like mission impossible since only
a few grams of uranium metal had been produced before World War II. By late summer in 1942 the delivery of the uranium was behind schedule and Frank Spedding
offered to use a different approach to make the metal via a metallothermic reduction
of uranium tetrafluoride, UF4. It was successful, and as an added bonus it was
purer than the metal produced by other organizations. By November, the ISU team
sent two tons of uranium cylinders (2 diameter 2 long) to Chicago. The addition
of these two tons to the four tons delivered previously allowed the reactor to go critical on December 2, 1942. This stellar contribution to the Manhattan Project was
recognized when ISU and Speddings team were awarded the Army and Navy E
for Effort with four stars pennant on October 12, 1945; the only university (college)
in the country to receive this prestigious honor. Since the Ames ingots were purer
and less expensive to produce, the Manhattan District asked three companies to
take over the Ames fluoride process and make large amounts of uranium for the
Oak Ridge and Hanford reactors. But since it took time to get the facilities up and
running the ISU group was asked to continue to produce uranium metal. More than
two million pounds were produced by the end of World War H, and by December
1945 industry took over. The Ames process, albeit somewhat modified, is still in use
today [1].
Soon thereafter, a new requirement arose in the war effort. Thorium metal was
needed for another type of reactor, and Spedding and his co-workers were asked to
develop a process for making thorium metal. Again they were successful and the
Ames thorium process was turned over to industry. In the meanwhile, 600,000
pounds of thorium were produced [1].
a Coined
by Chemical and Engineering News in the 1970s.

that time ISU was known as Iowa State College, but I will use ISU in this presentation.
The name change officially occurred in 1959.
b At
36
During the late war years, research on developing methods of separating the rare
earth elements was begun at several Manhattan District laboratories because some
of the rare earth elements were among fission products which would absorb neutrons because of their high neutron capture cross-section and eventually would
cause the reactor to shut down. Also the pure rare earth elements were needed to
study their chemical and metallurgical behaviors to help actinide chemists and
physicists understand the trans-uranium elements because of the expected similarities in the properties of the two series of elements. It was during these years that
Spedding and co-workers developed the ion exchange method for separating rare
earths, which was in commercial use for many years after World War H, until displaced by liquid-liquid extraction procedures. The ion exchange process is still in use
today to obtain the very highest purity rare earth elements (99.9999% pure), which
are primarily used in optical applications such as lasers and optical signal multipliers [1].
On May, 17, 1947 the Ames Laboratory became one of the Atomic Energy Commission (AEC) laboratories to promote the peaceful uses of atomic energy and to do
research to increase our understanding and knowledge of the chemistry, physics,
and nuclear behavior of the lesser known and uncommon elements, including the
rare earths [1].
Additional information about the Ames Laboratory and Frank H. Spedding during
World War II and the early post-World War II years can be found in several articles
authored by I.E. Goldman [2,3,4] and papers by J.D. Corbett [5] and by S.R. Karsjen
[6].
3. The Golden Age of Rare Earth Research
The time span of the 1950s through the 1970s was the golden age of rare earth
research at the Ames Laboratory. At that time there was a very wide spectrum of
research being carried out ranging from separation chemistry to analytical chemistry to process and physical metallurgy to solid state experimental physics to theoretical first principle calculations.
3.1 Separation Chemistry
The discovery of using ion exchange chromatography to separate and purify the
rare earths was further refined and improved in the 1950s through the 1960s. A
large pilot plant was set up to supply researchers at the Ames Laboratory and other
organizations, including many of the AECs national laboratories, with high purity
individual rare earths, to carry out fundamental and applied research on various
chemical compounds and the pure metals (see 3.33.6). In addition these ion exchange columns were used to separate the other rare earths from yttrium (also a
rare earth element) which was to be used in the nuclear aircraft (see 3.3).
3.2 Analytical Chemistry
In order to verify the chemical purity of the separated products new and more
sensitive chemical and physico-chemical analytical methods were developed to detect
impurities of both rare earth and other non-rare earth elements at the part per million level. This included wet chemistry, atomic emission and atomic absorption spectroscopy, laser ion mass spectrometry, vacuum and inert gas fusion, and combustion
analysis. This research also led to the development of inductively coupled plasma
(ICP)-atomic emission (AE) in the late 1970s, and ICP-mass spectrometry (MS),
which occurred in the early 1980s. The ICPMS technology was turned over to industry and today is still one of the most versatile and utilized analytical techniques,
see 5.
3.3 Process Metallurgy
This was one of the strengths of the Ames Laboratory in this time period. The
pure rare earth elements, after separating them on the ion exchange columns, were
converted to their respective rare earth oxides. The oxide was converted to the fluoride which was then reduced to the pure metal by calcium metal. These two processes were the critical steps for preparing high purity metals with low concentration
of interstitial impurities, especially oxygen, carbon, nitrogen, and hydrogen. The reduced metals were further purified by a vacuum casting step and for the more volatile rare earth metals further purification was carried out by distillation or sublimation. Generally, kilogram (2.2 pounds) quantities were prepared at the Ames Laboratory. Industry adopted the Ames process with some minor modifications to prepare commercial grade rare earth metals, and it is still in use today. This method
37
is still being carried out at the AL under the auspices of the Materials Preparation
Center (MPC), see 6.1.
In the late 1950s the AEC asked the Ames Laboratory to prepare pure yttrium
metal for the proposed nuclear aircraft. A nuclear reactor would be used to heat
gases to propel an airplane much like a jet engine. This aircraft would carry atomic
weapons for months at a time without landing. The yttrium was to be hydride to
form YH2 which is used to absorb the neutrons produced by the fission of uranium
protecting the crew from radiation. As part of this project the AL produced 65,000
pounds of YF3 and 30,000 pounds of yttrium metal. The yttrium metal was cast into
85 pound, 6 inch diameter ingots to ship to the General Electric Co. facilities in Cincinnati, Ohio.
In the mid-1950s, Spalding and A.H. Daane and their colleagues developed a new
technique for preparing high purity metals of the four highly volatility rare earths
samarium, europium, thulium, and ytterbiumby heating the respective oxides
with lanthanum metal and collecting the metal vapors on a condenser. This process
has also been turned over to industry and is used by ALs Materials Preparation
Center today ( 6.1).
3.4 Physical Metallurgy
Research in the physical metallurgy area encompassed: determining melting
points, crystal structures, vapor pressures, low temperature heat capacities, elastic
constants, and magnetic properties of the pure metals and various intermetallic
compounds; and phase diagram and thermodynamic properties studies; crystal
chemistry analyses; and alloying theory of rare earth-based materials. This was another strong focus area in the AL in the 1950s70s era which is still active today
but at reduced level.
Closely related, but not strictly physical metallurgy, was research on the mechanical behavior (tensile and yield strengths, ductility, and hardness) of the metals and
some of their alloys, and also oxidation and corrosion studies, especially yttrium in
conjunction with the nuclear aircraft project. From the information gained from the
mechanical property measurements, processes were developed to fabricate the rare
earth metals and their alloys at room and elevated temperature into a variety of
shapes and forms, e.g. rolled sheets.
3.5 Materials and Solid State Chemistry, and Ceramics
The chemical activity, in addition to separation and analytical chemistry 3.1 and
3.2) was another area in which the AL was considered to be world class, even
though the manpower levels were smaller than above noted areas of analytical
chemistry, process and physical metallurgy. Research was focused on the sub-stoichiometric rare earth halides, and interstitial impurity stabilized compounds including the halides. X-ray crystallography was an important tool in this focus area to
characterize these compounds. John D. Corbett was the lead scientist and is still
active today.
Investigations of ceramic materials were important in many of the studies and advances in process and physical metallurgy, not only for their refractory properties,
but also because of the need to contain the molten metals without contamination.
Rare earth oxides and sulfides, because of their intrinsic stability, were candidate
materials to contain the molten rare earths, uranium, thorium and other non-rare
earth metals.
3.6 Condensed Matter Physics
The AL was very strong in this area from the very beginning and still is today.
Research under the leadership of Sam Legvold was concentrated on the magnetic
behavior of the metals and the intra-rare-earth alloys. This work was strongly coupled with neutron scattering studies at both the Ames Laboratory and Oak Ridge
National Laboratory, and also with the theorists. The theoretical efforts included
first principle calculations (Bruce Harmon) and phenomenological approaches (Sam
Liu). Superconductivity was also another active topic of research, but most of the
effort was concentrated on non-rare-earth compounds.
3.7 Interdisciplinary Research
Two of the main strengths of the Ames Laboratory are magnetism and X-ray crystallography of rare earth and related materials. In part this is due to cooperative
research efforts that cut across the disciplines of physics, materials science, and
chemistry. Frank Spedding was one of the leaders in this approach to scientific research, which was rare in the 1950s.
38
4. Interactions with Industry
As mentioned above in 3 much of the research and development efforts were
turned over to industrythe uranium and thorium metal production, the ion exchange separation processes, and the analytical techniques (especially ICPMS). In
addition, K.A. Gschneidner, Jr. established the Rare-earth Information Center (RIC)
in 1966 with the initial support of the forerunner of BES, and later by industry
(starting in 1968), which totaled about 100 companies world-wide in 1996. RICs
mission was to collect, store, evaluate and disseminate information about new scientific discoveries, industrial developments, new commercial products, conferences,
books and other literature, honors received by rare earthers, and to answer information inquiries. RIC published two newslettersa quarterly (available free) and a
monthly (available to supporters of RIC), and occasional reports. In 1996 the directorship was turned over to R.W. (Bill) McCallum. But RIC ceased operation in August 2002when industry support dwindled significantly as China forced many
companies out of the rare earth markets with extreme price reductions and, simultaneously, a down-turn in the economy dried up state and Federal support.
Because of the expertise of individual AL scientists and/or some unique AL analytical or processing capability, many organizations, including industrial companies,
asked the AL to perform applied research as Work for Others projects or CRADAs.
Many of these non-DOE projects include the rare earths. One of these cases is discussed in more detail in 6.5. In addition to these individual interactions, the AL
established the Materials Preparation Center (MPC) in 1981 to provide unique metals, alloys and compounds to worldwide scientific and industrial communities; and
to perform unusual processes for fabricating materials which could not be done elsewhere, see 6.1. The functions carried out by the MPC over the nearly 30 years of
its existence are an outstanding example of AL-industry interactions.
Over the years various industrial organizations have sent their staff scientists
and engineers to work at Ames Laboratory getting firsthand experience on a particular technology. These arrangements may be part of CRADAs or Work for Others
projects.
In 2009 ISU became a research member of the Rare Earth Industry and Technology Association (REITA) to implement rare earth technology and promote commercialization of the rare earths for military and civilian applications.
5. Technology Transfer and Patents
The Ames Laboratory (AL) has been awarded 300 patents, of which about 45 are
concerned with rare earth materials. Ten patents deal with the rare earth-base permanent magnets and four with magnetic refrigeration materials. Before the passage
of the Stevenson-Wydler Technology Innovation Act of 1980 (P.L. 96480) and the
Dayh-Dole Act of 1980 (P.L. 96517) all patent rights were turned over to the U.S.
Government. After the Acts became law, the AL (a GOCOgovernment owned, contractor operated laboratory) began to license the various technologies developed at
the AL via the Iowa State University Research Foundation (ISURF).
The combination of inductive coupled plasma with atomic emission spectroscopy
in 1975 and later with mass spectrometry in 1984 was a quantum jump in increasing the sensitivity for detecting and determining trace elements in various materials. The two analytical methods were developed at the AL to improve the speed
and lower the limits of detecting various rare earth impurity elements in a given
rare earth matrix. This technique was soon applied to other impurities in a variety
of non-rare-earth materials, e.g. detection of poisons such as mercury and arsenic
in drinking water. The ICPMS and ICPAE technologies were turned over to industry and are now a standard analytical tool in over 17,000 analytical laboratories
worldwide. It is a rapid and accurate method for 80 elements, and in some cases
allows the detection of an impurity down to the parts per trillion level. Today there
are at least six companies that manufacture ICPMS instruments.
In addition to the various technology transfers noted in the previous paragraph
and in sections 2, 3.13.3, one of the more recent success stories is concerned with
Terfenol. Terfenol is a magnetic iron-rare-earth (containing dysprosium-terbium)
intermetallic compound which has excellent magnetostrictive properties. When a
magnetic field is turned on Terfenol will expand and when the magnetic field is removed it relaxes to its original shape and size. There are many applications for this
material including sonar devices for detecting submarines, oil well logging, vibration
dampers, audio speakers, etc. The magnetostrictive properties were discovered in
the early 1970s at the Naval Ordinance Laboratory in Maryland. Shortly thereafter
the Navy contracted the AL to grow single crystals and Terfenol samples with preferred orientations. The AL was successful and designed a procedure for making the
orientated material to maximize the amplitude of the magnetostrictive effect. Pat-
39
ents were issued and in the late 1980s ISURF licensed the processing technology
to Etrema, a subsidiary of Edge Technologies, Inc. in Ames, Iowa. Today Etrema
is a multimillion dollar business.
6. Where We are Today 19802010
With the Ames Laboratorys successes, some of the golden-age research was no
longer deemed to be basic research and funding dried up. In addition key personnel
started to retire. As a result of these two events a number of AL capabilities were
phased out completely. These include: analytical chemistry, separation chemistry,
process metallurgy, and ceramics. The excellent analytical capabilities were slowly
reduced and completely lost by the 2000s, except for inert gas fusion and combustion
analysis. The rare earth research activities in physical metallurgy and condensed
matter physics areas have also suffered some downsizing to about half the level of
what it was in the pre-1980 era, but what is left is still first class state-of-the-art
basic research.
In the following sections important activities that are still ongoing are described.
Other research that had been completed in the 1980s and may play in important
role in the future activities of a new national rare earth research center, is also
noted.
6.1 Materials Preparation Center
As an outgrowth of the Ames Laboratorys interactions with industry, other DOE
laboratories, universities, other research organizations, the Materials Preparation
Center (MPC) was established in 1981 to provide high purity metals (including the
rare earths, uranium, thorium, vanadium, chromium); and intermetallics, refractory,
and inorganic compounds, and specialty alloys; none of which are available commercially in the required purity or form/shape needed by the request or on a cost recovery basis. The MPC is a BES specialized research center with unique capabilities
in the preparation, purification, processing, and fabrication of well-characterized
materials for research and development. The Center is focused on establishing and
maintaining materials synthesis and processing capabilities crucial for the discovery
and development of a wide variety of use-inspired, energy-relevant materials in both
single crystalline and polycrystalline forms, spanning a range of sizes with well-controlled microstructures. There are four functional sections within the MPC: (1) high
purity rare earth metals and alloys; (2) general alloy preparation; (3) single crystal
synthesis; and (4) metallic powder atomization. Each area is provided scientific and
technical guidance by a Principal Investigator (PI) whose individual expertise is
aligned with the function of each section. The original director was F. (Rick) A.
Schmidt who retired in 1993 and turned over the directorship to Larry L. Jones.
In 2008 the MPC filled 183 external materials requests from 111 different scientists at 88 academic, national and industrial laboratories worldwide. Internally
the Center provided materials, and services for 53 different research projects that
totaled 1092 individual requests.
6.2 Nd2Fe14B Permanent Magnets
The announcement of the simultaneous discovery of the high strength permanent
magnet materials based on Nd2Fe14B by scientists at General Motors in the USA
and at Sumitomo Special Metals. Co., Ltd. in Japan in November of 1983 set off
a flurry of activities everywhere. The lead scientist at General Motors was John
Croat (an ISU graduate), who was Frank Speddings last graduate student. DOE/
BES funding for research on these materials at the AL started in 1986 and lasted
through 1998. U.S. Department of Commerce (DOC) funding for gas atomization
processing work on Nd2Fe14B alloys, through the ISU Center for Applied Research
and Technology, was received from 1988 through 1993. Funding was renewed at the
AL in 2001 under the auspices of DOE/EEREs Vehicle Technology (formerly
FreedomCar) program.
Notable achievements in the BES funded project included: (1) demonstrating that
the Nd2Fe14B compound can be prepared by a thermite reduction process that is
competitive with other methods of the permanent magnet material; (2) developing
methods for controlling the solidification microstructure of melt spun Nd2Fe14B
which leads to large energy products (the larger the energy product the better the
permanent magnet properties); (3) proposing a model for the rapid solidification of
a peritectic compound to explain the solidification microstructure of melt spun
Nd2Fe14B; and (4) developing a model for hysteresis in exchange coupled
40
nanostructure magnets. In 1996 the AL team headed by R.W. (Bill) McCallum c received the DOE Materials Science Award for Significant Implications for DOE Related Technologies, Metallurgy and Ceramics (items 2 and 3 above). A year later
this same team won an R&D100 Award for Nanocrystalline Composite Coercive
Magnet Powder (see 7.1). In the DOC funded project, an alternative rapid solidification process, gas atomization, was developed for making fine spherical Nd2Fe14B
powders, for which the AL (Iver Anderson and Barbara Lograsso) received an R&D
100 award in 1991 (see 7.1). They also received the Federal Laboratory Consortium
Award for Excellence in Technology Transfer for gas atomization processing of
Nd2Fe14B to enable improved molding of bonded magnets. The AL thermite reduction process (item 1), which was developed by F. (Rick) A. Schmidt, J.T. Wheelock
and Dave T. Peterson under MPC research, was selected for one of the 1990 IR
100 (changed to R&D 100 in 1991) Awards for new innovative research for potential commercialization.
The Vehicle Technology research funded by SERE is on-going and includes design
of improved Nd2Fe14B permanent magnets which can operate at high temperature,
enabling more powerful and more efficient motors. This project also is developing
further the high temperature RE magnet alloys for powder processing, intended for
injection molded bonded magnets for mass production of hybrid and electrical vehicles. Based on initial success with both aspects of the RE magnet project, in 2009
SERE expanded their support into the high risk task of identifying non-rare-earth
magnet alloys with sufficient strength for vehicle traction motors.
6.3 Nd2Fe14B Scrap Recovery
As manufacturers began to make the Nd2Fe14B material, it soon became apparent
there was a great deal of waste magnet material being generated because grinding,
melting and polishing the magnets into a final form/shape. Much of the magnet material is mixed with oils and other liquids used in these operationsthis material
is known as swarf. The team of scientists at AL headed by F. (Rick) A. Schmidt
developed two different processes to recover the neodymium metal: a liquid metal
extraction process to treat the solid materials; and an aqueous method for treating
the swarf. Both processes were patented, but the patents have since expired.
6.4 High Temperature Ceramic Oxide Superconductors
In the mid-1980s another major discovery occurred and had an enormous impact
on the rare earths as well as science and technology in generalthe discovery of
the oxide superconductor with transition temperatures greater than that of liquid
nitrogen 77 K (195 C). One of the key superconductors was YBa2Cu3O7, also
known as 1:2:3. It is utilized today in electrical transmission lines, electrical leads
in low temperature high magnetic field apparati and other superconducting applications. The AL had a strong tradition in superconducting research well before this
discovery, and when they learned of it the condensed matter physicists and materials scientists immediately began research on these ceramic oxide superconductors.
A National Superconducting Basic Information Center was established at AL in
1987 with financial support from DOEs BES. It was headed by John R. Clem, a
theorist who continues to consult with American Superconductor. The experimentalists worked diligently on various aspects of the 1:2:3 and other oxide superconductors to understand the processes by which they are formed and to prepare
high purity well characterized materials for physical property studies, which would
assist the theorists to understand the fundamental nature of these superconductors.
This work laid the ground work for the development of a method of fabricating the
rare earth 1:2:3 materials into filaments and flexible wires. Most of the research on
these oxide superconductors at AL has stopped and most of the know-how has been
turned over to industry. However, AL scientists are still at the forefront of the field
studying the new high temperature superconductors: the rare-earth-arsenic-ironoxide-fluoride and the MgB2 materials.
6.5 Magnetic Cooling
Magnetic cooling is new, advanced, highly technical, energy efficient, green technology for cooling and climate control of buildings (large and homes), refrigerating
and freezing food (supermarket chillers, food processing plants, home refrigerator/
freezers). The AL team headed by K.A. Gschneidner, Jr. and V.K. Pecharsky has
been involved with magnetic cooling since 1990, when Astronautics Corporation of
c Other team members were K. Dennis, M. Kramer and Dan Branagan, who moved to DOEs
INEEL laboratory.
41
America (ACA) asked Gschneidner to develop a new magnetic refrigerant material
to replace the expensive GdPd refrigerant they were using for hydrogen gas liquefaction (a DOE sponsored research effort). The AL team was successful and showed
that a (Dy0.5Er0.5)Al2 alloy was about 1000 times cheaper and 20% more efficient
than GdPd. A patent was issued for this new magnetic refrigerant material. This
work was recognized as the best research paper presented at the 1993 Cyrogenic
Engineering Conference. A few years later AL teamed up with ACA and designed,
constructed and tested a near room temperature magnetic refrigerator. In 1997 they
demonstrated that near room temperature magnetic refrigeration is competitive
with conventional gas compression cooling technology and is about 10% more efficient, and is a much greener technology because it does not employ ozone depleting,
or greenhouse, or hazardous gases [7]. This work was funded by BESs Advanced
Energy Project program. Additional research on magnetocaloric materials was supported by BES after the Advanced Energy Project ended in 1998. But in 2005 BES
funding for this research was terminated because they thought it was no longer
basic research, i.e. it was too applied. Since then some work has continued on
magnetocaloric materials under a work for others subcontract with ACA who has
a Navy contract to build shipboard cooling machines, and a few SBIRs which are
being funded by EERE.
This research on magnetic cooling is a good example of ALs response to a problem
encountered by industry which was successfully solved, and then later, this work
led to a whole new cooperative AL-industry project on near room temperature magnetic refrigeration.
6.6 Neutron Scattering
Neutron scattering is a powerful tool in determining magnetic structures of magnetic materials and it compliments magnetic property measurements made by
standard magnetometers. The rare earth research at AL has benefited from interactions with the neutron scatterers. In the early 1950s Frank Spedding and Sam
Legvold of the AL had a close relationship with the neutron scattering group headed
by Wally Koeller at Oak Ridge National Laboratory neutron scattering facility and
furnished single crystals of the rare earth metals. Recognition and demand for neutron scattering resulted in a 5MW reactor being constructed locally for Ames Laboratory. Scientists used this reactor for extensive measurements of the electronic
interactions in rare earth and other magnetic materials. Because of a large jump
in the cost of operating and fueling this reactor, it was shut down in 1978. The relationship with the neutron scattering effort at Oak Ridge was enhanced and continued for many years up to about 1980, shortly before the death of the three scientists
in 198384. To this day a dedicated neutron scattering facility, run by AL scientists,
operates at the Oak Ridge High Flux Isotope Reactor (HFIR). It is still of great benefit to AL scientists studying rare earth materials.
6.7 X-ray Magnetic Scattering
X-ray magnetic scattering is a fairly new tool, which was developed in the early
1990s, to study magnetic structures. It is fortunate that this new tool became available because a few of the rare earth elements, especially gadolinium, readily absorb
neutrons and neutron scattering measurements are very difficult if impossible to
make. Thus, X-ray magnetic scattering has been especially useful in determining
the magnetic structures of gadolinium compounds.
In more recent years scientists have improved the X-ray magnetic scattering technique, which is called X-ray magnetic circular dischroism (XMCD). The AL scientists
have been on the forefront by applying the latest experiments and theoretical tools
to help elucidate complex electronic interactions underlying bulk magnetic properties. The AL team, led by Alan Goldman (experiment) and Bruce Hannon (theory),
has been pioneers in the development and application of XMCD on rare earth materials. This tool gives valuable and direct information about the itinerant electrons
responsible for coupling the individual localized magnetic moments of each rare
earth atom in a solid. The stronger the microscopic coupling the stronger the bulk
magnet, and the more useful it can be in applications. Such experiments and powerful computers are essential for helping AL scientists in their latest materials discovery initiative to accelerate the discovery of new magnetic materials for industry.
6.8 Emerging Technologies
One of the new and exciting, ongoing developments at Ames Laboratory is a revolutionary method of preparing rare earth-based master alloys for energy and other
applications. In addition to lowering costs of the starting material, the processing
technique also reduces energy consumption by 40 to 50% and is a very green tech-
42
nology. The work on preparing Nd2Fe14B magnet material began about a year ago
with financial support from AL patent royalties, and it has been reduced to practicewe have prepared a state-of-the-art permanent magnet on February 5, 2010,
see attached figure. It is a one step process going from the neodymium oxide to the
neodymium master alloy, and since the end-products are completely utilized, there
are no waste materials to dispose of. The conventional process also starts with the
neodymium oxide but takes two steps to obtain the neodymium metal, and there are
waste products associated with both steps which need to be disposed of in an environmentally friendly manner. The step to prepare the Nd2Fe14B magnet material is
essentially the same in either case. This processing technique was invented by F.
(Rick) A. Schmidt and K.A. Gschneidner, Jr. A provisional patent has been filed.
A modification of this process should enable us to prepare a lanthanum master
alloy to prepare lanthanum nickel metal hydride batteries, which are used in hybrid
and electrical vehicles. Likewise, we believe this process can be used to make magnetic rare earth refrigerant alloys (see 6.5).
7. Kudos
The Ames Laboratory scientific achievements and their science/engineering leaders have been recognized by several organizations including DOE.
7.1 R&D100 Awards (former IR100 Awards)
Industrial Research magazine annually identifies the nations top 100 technological innovations, called the ER100 Awards before 1991 and now are called the
R&D100 Awards. These awards are also known as the Oscars of Science. Over
the past 25 years AL has received 17 R&D100 Awards. Of these three are involved
with rare earths, in particular the Nd2Fe14B permanent magnet materials. These
are listed below.
1990: Thermite Reduction Process to Make Rare-earth Iron Alloys F. (Rick)
A. Schmidt, John T. Wheelock and Dave T. Peterson
1991: HPGA (High Pressure Gas Atomization) Iver Anderson and Barbara
Lograsso
1997: Nanocrystalline Composite Coercive Magnet Powder R.W. (Bill)
McCallum, Kevin Dennis, Matt Kramer, and Dan Branagan
43
Left: Our KAA134 composition. 60/40 by vol. Nd2Fe14B/PPS (poly(phenylene sulfide). Hot pressed at 300 C and magnetized with a 2T electromagnet. The second
bonded permanent magnet prepared.
Center: Practice magnet of similar composition. The surface is boron nitride coating from the die used to compact the Nd2Fe14B particles in the polymer.
Right: First Bond permanent magnet. 30/70 by vol. Nd2Fe14B/diallyl phthalate
sample mounting material. Hot pressed and sealed with thin layer of epoxy.
7.2 National Academies Members
Six Ames Laboratory scientists have been named to the National Academy of
Sciences and the National Academy of Engineering. Frank H. Spedding was elected
in 1952 and John D. Corbett in 1992 to the National Academy of Sciences. The four
National Academy of Engineering members are: Donald O. Thompson1991, Dan
Schechtman2000, R. Bruce Thompson2003, and Karl A. Gschneidner, Jr.2007.
Of the six three (Spedding, Corbett and Gschneidner) were heavily involved in the
rare earth science and technology of rare earths during their careers. Corbett and
Gschneidner are still actively engaged in research and development activities.
Spedding died in 1984 but was still active until shortly before his passing.
7.3 Department of Energy Awards
Scientists at AL have won several DOE, (mostly from BES) awards for their scientific achievements. These are listed below.
1982 K.A. Gschneidner, Jr. and K. Ikeda for quenching of spin fluctuations
1991 I.E. Anderson and B.K. Lograsso received the Federal Laboratory Consortium Award for Excellence in Technology Transfer for high pressure gas
atomization of rare earth permanent magnet alloys
1994 B.J. Beaudry for thermoelectric materials characterization from DOEs
Radioisotope Power Systems Division
1995 J.D. Corbett for sustained outstanding research in materials chemistry
44
1995 A.I. Goldman, M.J. Kramer, T.A. Lograsso, and R.W. McCallum for sustained outstanding research in solid state physics
1996 D. Branagan, K.W. Dennis, M.J. Kramer, R.W. McCallum for studies on
the solidification of rare earth permanent magnets
1997 K.A. Gschneidner, Jr. and V.K. Pecharsky for contributions to the advancement of magnetic refrigeration
2001 K.A. Gschneidner, Jr. and V.K. Pecharsky received the Energy 100
Award for research on magnetic refrigeration as one of the 100 discoveries between 1997 and 2000 that resulted in improvements for American
consumers.
Acknowledgements
The author wishes to thank his colleagues and associates for assisting him in putting this report together. They are: A.H. King, Director, Ames Laboratory; and K.A.
Ament, I.E. Anderson, J.D. Corbett, D.L. Covey, K.B. Gibson, B.N. Harmon, S.L.
Joiner, S.R. Karsjen, L.L. Jones, T.A. Lograsso, R.W. McCallum, V.K. Pecharsky,
F.A. Schmidt, and C.J. Smith.
References
1. H.J. Svec, pp. 131 Prologue in Handbook on the Physics and Chemistry of Rare
Earths, vol. 11, K.A. Gschneidner, Jr. and L. Eyring Eds., Elsevier Science Publishers (1988).
2. J.A. Goldman, National Science in the Nations Heartland. The Ames Laboratory
and Iowa State University, 19421965, Technology and Culture 41, 435459
(2000).
3. J.A. Goldman, Mobilizing Science in the Heartland: Iowa State College, the State
University of Iowa and National Science during World War II, The Annals of
Iowa 59, 374397 (Fall 2000).
4. J.A. Goldman, Frank Spedding and the Ames Laboratory: The Development of
a Science Manager, The Annals of Iowa 67, 5181 (Winter 2008).
5. J.D. Corbett, Frank Harold Spedding 19021984, Biographical Memories 80, 1
28 (2001); The National Academy Press, Washington, DC.
6. S.R. Karsjen, The Ames Project: History of the Ames Laboratorys Contributions
to the Historic Manhattan Project, 19421946, published by Ames Laboratory
Public Affairs, Iowa State University, Ames, Iowa (2003).
7. K.A. Gschneidner, Jr. and V.K. Pecharsky, Thirty Years of Near Room Temperature Magnetic Cooling: Where we are Today and Future Prospects, Intern. J.
Refrig. 31, 945961 (2008).
QUESTION 2: BASIC RESEARCH PROGRAM
In the 1990s the Chinese flooded the marketplace with low priced raw rare earth
products (mixed and separated rare earth oxides) and as a result, not only did the
primary rare earth producers in the United States and the rest of the world shut
down, but technical personnel with expertise in rare earth mining, refining, extraction, etc. found employment in other industries. Soon thereafter the Chinese began
manufacturing higher value rare earth products, including rare earth permanent
magnet materials, and in time, all of the Nd2Fe14B magnet manufacturers in the
United States also went out of business. This also resulted in a brain drain of scientists and engineers in this field, and also in all high-tech areas involving other
rare earth products, such as high energy product permanent magnet materials, metallic hydrogen storage and rechargeable battery materials. Some of these experts
have moved on to other industries, others have retired, and others have died, basically leaving behind an intellectual vacuum.
In the late 2000s the Chinese game plan changed, and they have started to exercise export controls on a variety of rare earth products, and signaled that they intend to consume all the rare earths mined in China internally in the next three to
five years. This change will allow the rare earth producers and manufacturers to
supply the needed products, but this presents several problems which have been
cited by others at this House Committee hearing. One of these is the shortage of
trained scientists, engineers, and technicians. Another need is innovations in the
high tech areas which are critical to our countrys future energy needs. A research
center which alleviates both of these problems is the best way to work our way
through the rare earth crisis facing the USA. An educational institution which has
a long and strong tradition in carrying out research on all aspects of rare earth ma-
45
terialsfrom mining and purification to basic discovery and applications over a
number of disciplines (i.e. chemistry, materials, physics, and engineering) with a
strong educational component (undergraduate, graduate and post doctoral students)
would be the ideal solution. A National Research Center on Rare Earths and Energy
should be established at such an institution initially with Federal and, possibly,
state support, and as the U.S. rare earth industry matures in five to ten years, supplemented by industrial financial support. The center would employ about 30 full
time employeesgroup leaders; associate and assistant scientists and engineers;
post docs, graduate and undergraduate students; and technicians plus support staff.
This research center will be a national resource for the rare earth science, technology and applications, and therefore, it would also provide broad support of research activities at other institutions (universities, national laboratories, non-profit
research centers, and industry) who would supply intellectual expertise via subcontracts to complement the activities at the center.
The major emphasis of the center would be goal oriented basic research, but proprietary research directly paid by the organizations that request it would also be
part of the centers mandate. The center would have an advisory board to oversee,
guide and refocus as needed the research being conducted. The advisory board
would be made up of representatives from the university, government, industry and
the general public.
I would like to suggest to this House subcommittee that they consider .a second
national center, the National Research Center for Magnetic Cooling. Cooling below
room temperature accounts for 15% of the total energy consumed in the USA. As
noted in my response to the first question, magnetic refrigeration is a new advanced, highly technical, energy efficient green technology for cooling and climate
control of buildings,-ships, aircraft, and refrigerating and freezing ( 6.5). We have
shown that magnetic cooling is a refrigeration technology competitive with conventional gas compression cooling. Magnetic cooling is 10 to 20% more efficient, and it
is a very green technology because it eliminates hazardous and greenhouse gases,
and reduces energy consumption. If we were able to switch all of the cooling processes to magnetic refrigeration at once we would reduce the nations energy consumption by 5%. But there are a lot of hurdles that need to be overcome and the
USA needs to put together a strong, cohesive effort to retain our disappearing leadership in this technology, by assembling a National Research Center for Magnetic
Cooling. Europe and China are moving rapidly in this area, and Denmark has assembled a magnetic refrigeration national research center at Risoso far the only
one in the world. The U.S. Center should be structured similar to what has been
proposed in the above paragraphs for the National Research Center on Rare Earth
and Energy. The question is, are we going to give up our lead position and be a
second rate country, or will we be leading the rest of the world? I hope and pray
that the answer is, we are going to show the world that we are number one.
QUESTION 3: KNOWLEDGE TRANSFER
Knowledge is transferred from a research organization to industry through two
primary routes. The first is the transfer of intellectual property. Research findings
carried out at universities, colleges, non-profit organizations, and DOE and other
Federal laboratories are disseminated as published articles in peer-reviewed journals and in trade journals, presentations at national and international conferences,
electronic media, or their organizations web site, and if exciting enough, via news
conferences and press releases assuming the new results are not patentable. If, however, the research has some potential commercial value, this new information/data
should be made available as soon as feasibly possible after filing a patent disclosure.
However, before the patent is filed one could disseminate the results to companies
that might be interested by contacting them directly to see: (1) if they are interested, (2) if they would sign a non-disclosure agreement, and (3) if they answer yes
to both (1) and (2) then the information could be disclosed to them. However, all
the companies must be treated equally and fairly.
The second route is highly effective when the research organization is connected
with a university. This is exemplified by Ames Laboratory and Iowa State University. AL employs a significant number of ISU students in part time positions either
as graduate research assistants or undergraduate research helpers. These science
and engineering students, particularly at the bachelors and masters levels, transfer
the skills and process the knowledge gained in working in the laboratory to their
employers after they graduate.
46
QUESTION 4: U.S. RESEARCH ON RARE EARTH MINERALS
Rare earth research in the USA on mineral extraction, rare earth separation,
processing of the oxides into metallic alloys and other useful forms (i.e. chlorides,
carbonates, ferrites), substitution, and recycling is virtually zero. As is well-known,
research primarily follows money; but prestige and accolades are other drivers; or
when someone serendipitously comes up with an exciting idea for a research project.
The lack of money and excitement accounts for the low level of research on the
above topics.
Today some work on rare earth and actinide separation chemistry is directed toward treating waste nuclear products and environmental clean-up of radioactive
materials in soils is being carried out at various DOE laboratories. This research
may be beneficial to improving rare earth separation processes on a commercial
scale.
Some research at various universities might be considered to be useful in finding
substitutes for a given rare earth element in a high tech application. But generally
the particular rare earths. properties are so unique it is difficult to find another
element (rare earth or non-rare earth) as a substitute.
The Chinese have two large research laboratories which have significant research
and development activities devoted to the above topics. They are the General Research Institute for Nonferrous Metals (GRINM) in Beijing, and the Baotou Research Institute of Rare Earths (BRIRE) in Baotou, Inner Mongolia. GRINM is a
much larger organization than the Baotou group, but the rare earths activity is
smaller than what is carried out at BRIRE. The Baotou Research Institute of Rare
Earths is the largest rare earth research group in the world. Baotou is located about
120 miles from the large rare earth deposit in Inner Mongolia and is the closest
large city to the mine. This is the reason why BRIRE is located in Baotou.
BIOGRAPHY
FOR
KARL A. GSCHNEIDNER, JR.
Karl A. Gschneidner, Jr. was born on November 16, 1930 in Detroit, Michigan,
and received his early education at St. Margaret Mary grade school and St. Bernard
high school. He attended the University of Detroit, 19481952 and graduated with
B.S. in Chemistry. He went to graduate school at Iowa State College (became Iowa
State University in 1959) and in 1957 obtained a Ph.D. degree in Physical Chemistry studying under Distinguished Professor Frank H. Spedding and Professor Adrian H. Daane. He then worked in the plutonium research group at the Los Alamos
Scientific Laboratory from 1957 through 1963. In 1963 he joined the Department
of Metallurgy as an Associate Professor, and jointly as a group leader at the Ames
Laboratory of Iowa State University. He was promoted to a full professor in 1967,
and named a Distinguished Professor in 1979. In 1966 he founded the Rare-earth
Information Center and served as its Director for 30 years. He was also the Program
Director for Metallurgy and Ceramics at the Ames Laboratory from 1974 to 1979.
He taught mostly graduate level courses, including x-ray crystallography, the physical metallurgy of rare earths, and alloying theory.
Gschneidner, sometimes known as Mr. Rare Earths, is one of the worlds foremost authorities in the physical metallurgy, and the thermal, magnetic and electrical behaviors of rare earth materials, a group of chemically similar metals naturally occurring in the earths crust. His work lately has taken him into the field of
magnetic refrigeration, a developing technology that has the potential for significant
energy savings with fewer environmental problems than existing refrigeration systems.
Gschneidner has over 450 refereed journal publications and nearly 300 presentations to leading scientific gatherings worldwide to his credit. Holder of more than
a dozen patents, he has been honored with numerous awards by governmental, professional, and industrial bodies, including recognition for his Ames Lab teams research in magnetic refrigeration by the U.S. Department of Energy in 1997 and with
an Innovative Housing Technology Award in 2003.
In addition to the National Academy of Engineering, Gschneidner is also a Fellow
of the American Society for Materials-International, The Minerals, Metals and Materials Society, and the American Physical Society. In 2005, he was honored for 53
years of outstanding contributions to his field with a symposium at Iowa State that
was attended by some of the worlds leading experts in rare earth materials, many
of them his former students or collaborators. He maintains an active research program with Ames Laboratory.
Chairman MILLER. Thank you, Dr. Gschneidner. Mr. Smith for

five minutes.
47
STATEMENT OF MR. MARK A. SMITH, CHIEF EXECUTIVE
OFFICER, MOLYCORP MINERALS, LLC
Mr. SMITH. Thank you. Chairman Miller, Ranking Member

Broun, other distinguished Members of the Subcommittee. I would
like to thank you for the opportunity to be here today.
This is the first committee to hold a hearing specifically on this
issue, and I want to commend you for your leadership in this regard.
It has been remarkable, in my 25 years in this business, to see
the use of rare earths literally explode in front of our eyes. However, while rare earth-based technologies have become more and
more essential and more and more a part of our everyday lives, the
United Statesas well as the rest of the worldhas become almost
completely dependent on China for access to the rare earth resources and the metals, alloys and magnets that derive from them.
A combination of three factors should make this situation one of
urgent concern to policymakers: first, the indispensability of rare
earths in clean energy and defense technologies; two, the almost
complete dominance of rare earth production by China; and three,
Chinas accelerating consumption of their own rare earth resources.
On the screen in front of you is a slide that just touches the surface of some of the uses of rare earths in the world today. On the
clean energy side, rare earths are used in the advanced nickel hydride batteries for hybrid cars as well as the rare earth permanent
magnets that power the highly efficient next generation of wind
turbines and the electric and hybrid vehicle motors and generators.
Rare earth phosphors are what illuminate compact fluorescent
light bulbs which are currently mandated in the European Union.
48
On the defense side, missile guidance systems, electronics, communications and surveillance equipment, just to name a few applications, all require rare earths. None, let me repeat, none of these
technologies will work without rare earths, and yet each is tied directly to some of the Nations highest national priorities today.
On the screen in front of you now I have provided a simplified

version of a wind turbine supply chain from a rare earth perspective. With the exception of our historic rare earth mineral production at the very start, none of the capabilities in the green box really exist in the United States today. The result is a supply chain
capability gap in the United States that has the potential to become a very serious strategic and economic disadvantage. Today,
China actually produces over 97 percent of the worlds rare earth
oxides. They produce almost 100 percent of the associated metals
and 80 percent of the rare earth magnets. For the last 15 years,
Chinas production has been able to satisfy their own internal
needs as well as those of the rest of the world. However, it is predicted that rapid Chinese demand growth, coupled with lower and
lower Chinese government-controlled export quotas, will continue
to decrease the amount of rare earths available to the rest of the
world, thereby creating a serious supply gap. Forecasts conclude
that this shortage could occur by 2012, and with Chinas recently
announced commitment to be the worlds largest producer of wind
energy and electric vehicles, this will certainly not help that timeframe.
In order to truly break our near-total dependence on China,
Molycorp has developed its mining-to-magnet strategy. Molycorp
has 57 years of experience in the rare earth industry and has a
world-class ore deposit at its rare earth facility in Mountain Pass.
We have invested over $20 million in process technology improvements in advance of our restart project, and the resulting efficiencies will drastically improve our overall cost competitiveness,
as well as our environmental stewardship.
We also believe that our mine-to-magnets project could create an
estimated 900 new direct jobs as well as 700 temporary construction jobs in the United States, not to mention the multiplier effect
this will have in both green and defense technological industries in
this country.
49
Molycorp is the only rare earth company outside of China that
stands shovel-ready. We are uniquely well-positioned to rebuild the
rare earth supply chain from mining to magnets, and we can do it
in the shortest timeframe possible.
The Federal Government clearly has a role to play. As you consider legislation, there are four areas I think you can have the
greatest impact on. The first is Federal loan guarantees. We applied for the DOEs loan guarantee program in the fall of 2009, and
our application was recently rejected as ineligible. The DOE contends that this project goes too far upstream and that their program was not intended to cover projects that go all the way back
to mining. Congress will need to provide legislative direction or
new legislative language clarifying the use of loan guarantees for
strategically vital supply chain projects.
Second, the Federal Government and this committee in particular can play a pivotal role in reestablishing our world class rare
earth knowledge and expertise the way it used to be.
Number three, as noted earlier, the White House OSTP is working with the Departments of Commerce, Defense and State to lead
a collaborative interagency effort on this issue. We are very encouraged by this effort, but the imminent global supply and demand
challenge clearly necessitates more urgency by the Administration
right now.
And finally, Federal funding support for competitive grants specifically directed at the rare earth research and technology industry, including recycling, will certainly help to further expand the
United States capabilities in the rare earth world.
Thank you, Mr. Chairman, for this time today, and I would be
happy to answer any questions later.
[The prepared statement of Mr. Smith follows:]
PREPARED STATEMENT
OF
MARK A. SMITH
Introduction
Chairman Miller, Ranking Member Broun, and Members of the Subcommittee, I
want to thank you for the opportunity to share my observations, experiences, and
insights on the subject of rare earths, the critical role they play in the technologies
that will shape our future, the looming supply challenges that are ahead of us, and
the work we are doing at our facility at Mountain Pass, California. This is the first
Committee to hold a hearing specifically on this important topic, and I want to commend you for your leadership and forethought.
Im the CEO of rare earths technology company Molycorp Minerals, LLC.
Molycorp owns the rare earth mine and processing facility at Mountain Pass, California, one of the richest rare earth deposits in the world, and we are the only active
producer of rare earths in the Western Hemisphere. I have worked with Molycorp
and its former parent companies, Unocal and Chevron, for over 25 years, and have
watched closely the evolution of this industry over the past decade. It has been remarkable to watch the applications for rare earths explode. However, as rare earthbased technologies have become more and more essential, the U.S., which invented
rare earth processing and manufacturing technology, has become almost completely
dependent on China for access to rare earths and, more specifically, the metals, alloys and magnets that derive from them.
On its face it may not seem any more disconcerting than any other material dependency. However, it is the combination of three key factors that make this situation one of urgent concern to policymakers: 1) the indispensability of rare earths in
key clean energy and defense technologies; 2) the dominance of rare earth production by one country, China, and 3) Chinas accelerating consumption of their own
rare earth resources, leaving the rest of the world without a viable alternative
source.
50
The development of clean energy technology is a top national priority, as these
innovations are key to our broader national objectives of greater energy security and
independence, reduced carbon emissions, long term economic competitiveness, and
robust job creation. Yet all of these crucial national objectives become less achievable if we lack access to rare earth resources.
Our company has produced rare earths for 57 years, and we are in the process
of restarting active mining and down-stream processing at Mountain Pass. We are
redeveloping our facilities to dramatically increase our production, and we are executing a strategy to rebuild the rare earth metal and magnet manufacturing capabilities that our country has lost in the past decade. This effort will help to address
rare earth access concerns and may help to catalyze clean tech manufacturing, but
the lingering question is how quickly we can make this happen, as the looming supply concerns seem to accelerate every day.
Below I offer my perspective on rare earths and their applications, Americas rare
earth capability gap, the global supply concerns and their implications, our work at
Molycorp to expand our domestic rare earth access, and the role the Federal Government can play to help address the looming supply concerns.
Rare Earth Elements and Key Applications
Rare earths are a group of 17 elements (atomic numbers 5771 along with Sc and
Y) whose unique properties make them indispensable in a wide variety of advanced
technologies. One rare earth in particularneodymium (Nd)is used to create the
very high powered but lightweight magnets that have enabled miniaturization of a
long list of consumer electronics, such as hard disk drives and cell phones. While
high-tech applications such as these have dominated the usage of rare earths over
the past decade, it is their application in clean energy technologies and defense systems that has brought heightened attention to rare earths.
Rare earths are indispensable in a wide variety of clean energy technologies. Rare
earth metals are used in the advanced nickel-metal hydride (NiMH) batteries that
are found in most current model hybrids; powerful rare earth magnets enable next
generation wind turbines, electric vehicle motors, and hybrid vehicle motors and
generators; and rare earth phosphors are what illuminate compact fluorescent light
bulbs. On the defense side, missile guidance systems, military electronics, communications and surveillance equipment all require rare earths. None of these technologies will work without rare earths, and yet each of these technologies is tied
closely to some of the nations highest national priorities, our energy and national
security.
The list of rare earth applications is long and varied, but there are additional applications that are worth noting specifically. The automotive sector is a big user of
rare earths. Cerium is used to polish glass and provides protection from UV rays.
In the 1970s, rare earths replaced palladium for use in catalytic converters, and if
palladium were still used today, cars would be significantly more expensive. They
are also used in petroleum refining and as diesel additives.
At Molycorp, we have also found a use for cerium in water filtration. We have
developed proprietary water filtration technology that has applications in industrial
wastewater treatment, clean water production in the developing world, and the
recreation and backpacking market.
The diagram below offers a broader view of rare earths applications:
51
Despite their name, rare earths are not rare. If you were to go outside right now
and grab a handful of dirt from the ground, it would contain rare earths. However,
it is far more difficult to find rare earths in a concentration high enough to be mined
and separated economically. When rare earths are extracted from the ground, the
ore contains all of the rare earths, and it is through highly complex separation processes that each individual rare earth oxide can be produced. It is this separation
process that largely drives the cost of rare earth production. Ore bodies that contain
rare earths at percentages in the low single digits cannot be mined economically
under current prices for rare earths.
Thus, today, there are only 3 known and verified locations where a sufficiently
high concentration of rare earths exists: Baotou, China; Mountain Pass, California,
where Molycorps mine is located; and Mt. Weld, Australia, which has a rich ore deposit but none of the infrastructure necessary to begin extraction, separation, and
distribution to market. Given these circumstances, Molycorps mine at Mountain
Pass is clearly one of the only rare earth resources in the world that is immediately
minable, economically viable, and can provide a near-term source of rare earth materials. With supply concerns becoming increasingly imminent, the greatest challenge facing Molycorp is the speed at which we can bring these needed resources
online. I will discuss this in further detail later in this testimony.
Industrial Supply Chain and Americas Capability Gap
One of the biggest challenges in raising awareness and understanding about rare
earths is that they are found so early in the industrial supply chain that it is difficult to contemplate their usage in products that we see every day. To illustrate
this point, consider the example of the new generation of wind turbines, which employ rare earth-based permanent magnet generators with reliability and efficiency
improvements of 70% over the current industry standard. Below is a simplified supply chain:
52
Once the rare earths are mined, they are separated and converted to oxides and
then converted into metals. The metals are then manufactured into alloys and magnet powders. The powders are then bonded or. sintered to form the magnets required for turbine production. The turbine, in turn, is included in the windmill assembly, and the final product is installed. All of the functions within the green box
are necessary to be able to produce the magnets required for this clean energy technology and so many others. However, other than the rare earth mineral extraction
and conversion to oxides, the other manufacturing capabilities in the green box no
longer exist in the United States. The U.S. did at one time possess all of these capabilities, and in fact, these technologies largely originated here. However, over the
past decade as American manufacturing has steadily eroded, the U.S. has ceded this
technological ground to competitors in China, Japan and Germany.
China has become particularly dominant, and some would contend that it has
been by design. In the early 1990s, Chinas Deng Xiaoping was quoted as saying,
There is oil in the Middle East; there is rare earth in China. 1 China realized that
it had a significant natural resource advantage, and through the development of
new applications in an ever-expanding number of advanced technologies, China
helped to grow the market for rare earths from 40,000 tons in the early 1990s to
roughly 125,000 tons in 2008. It is over that same period that, due to a variety of
factors, the U.S. ceased active mining of rare earths.
While the U.S. still possesses the technical expertise, we have lost the necessary
infrastructure to manufacture the rare earth metals and magnets that fuel next
generation technologies. The last rare earth magnet manufacturer in the U.S. was
a company called Magnaquench, formerly located in Valparaiso, Indiana, and owned
by General Motors. Magnaquench and all of its U.S. assets were sold to a Chinese
company in the early 2000s in an effort to help GM gain access to the Chinese market.2 Two domestic companies can produce small quantities of rare earth based alloys but none can convert the rare earth oxides to metal. The result is a significant
rare earth capability gap in the U.S. that has the potential to quickly become a
major strategic and economic disadvantage.
Global Supply Concerns and Implications for the U.S.
Today, the production of rare earths, and the metals and magnets that derive
from them, is overwhelmingly dominated by China. At present, China produces 97%
of the worlds rare earth supply, almost 100% of the associated metal production,
and 80% of the rare earth magnets. Complicating this picture even further, Chinas
national consumption of rare earth resources is growing at an intense pace, consistent with their meteoric GDP growth, and it is leaving the rest of the world with
less of these critical materials just as the clean energy economy is beginning to gain
momentum. As the chart below from rare earths research firm, the Industrial Minerals Company of Australia (IMCOA) demonstrates, Chinas massive production has
been able to satisfy both their own internal needs and those of the rest of the world.
However, as the blue line indicates Chinese demand for its own rare earths will
soon match, if not eclipse, its own internal supply, and with global demand (in yellow) growing at a parallel pace, there is a significant production gaparound 60,000
tonsthat must be filled in a very short timeframe.
1 Cox, Clint. (2006, October 10). Rare earth may be Chinas checkmate. Retrieved from the Anchor House web site on February 5, 2010 at http://www.theanchorsite.com/2006/10/.
2 Moberg, David. (2004, January 23). Magnet Consolidation Threatens Both U.S. Jabs and Security. Retrieved from the In These Times web site on February 5, 2010 at http://
www.inthesetimes.com/article/685/.
53
IMCOAs previous forecasts concluded that this critical shortage for the rest of the
world outside of China would occur by 2012, but China has recently said that it intends to be the worlds largest producer of wind energy and electric vehicles and has
committed $150 billion and $29 billion to these two respective clean technology sectors (by comparison, the entire amount of stimulus funding under the American Recovery and Reinvestment Act directed at all areas of clean energy deployment was
$60 billion). The new, more efficient wind turbines that use rare earth permanent
magnet generators require around 2 tons of rare earth magnets per windmill. The
rare earth industry has never seen this level of demand. To date, rare earth producers like Molycorp have filled orders by the pound or kilogram, not by the ton.
If Chinas commitment holds true, this will vastly accelerate their consumption of
rare earths and speed up the date when the rest of the world will find its access
to rare earths severely limited.
Around the same time that China was outlining its clean energy investments, it
also began to consider steps to reduce the availability of its rare earths to the rest
of the world. As if the demand forecasts werent disconcerting enough, China heightened international supply concerns last fall when its Interior Ministry signaled that
it would further restrict its exports of rare earth resources. China has been steadily
decreasing its exports by an average of 6% per year since 2002, but these new restrictions portend a more aggressive effort to use its own resources domestically.
This critical issue was featured on the front page of the New York Times business
section on August 31, 2009, and Ive included the article for the Committees record.
Finally, in late December, China announced that it will begin to stockpile rare
earths. It is our estimation that if they are announcing it officially to the rest of
the world, it is highly likely that the stockpiling has been occurring for some time.
Regardless, it will have a further depressive effect on global supply.
Energy Security and Global Competitiveness
Disruption in the global supply of rare earths poses a significant concern for
Americas energy security and clean energy objectives, its future defense needs, and
its long-term global competitiveness. Rare earths may not be familiar to most people, hidden deep in the industrial supply chain, but they are absolutely indispensable for so many of the advanced technologies that will allow us to achieve critical
national objectives.
Efforts to decrease U.S. dependence on foreign oil and develop a clean energy
economy, as well as the jobs that come with it, have received broad bipartisan support, and few would disagree that the U.S. must diversify its sources of energy and
slow the demand for fossil fuels. Wind power and electric vehicles (EVs) have
emerged as technologies that will play important roles in these efforts, and the U.S.
has indicated it intends to be a leader in both. As noted above, the most efficient
wind turbines require multiple tons of rare earths, and as the U.S. moves to increase the percentage of power that comes from wind, there will be a commensurate
increase in domestic demand for rare earths. The American automotive industry is
expanding the number of hybrid, plug-in hybrid (PHEV), and full electric vehicle
(EV) models in an effort to produce far more fuel efficient products, and yet many
54
of the advanced batteries that power hybrids and PHEVs utilize several kilograms
of rare earth metals in each unit. The motors and generators in these new vehicles
also use several kilograms of rare earth permanent magnets. Similar implications
exist for our national defense capabilities. From military communications equipment
to missile guidance systems, rare earths enable a long list of advanced defense technologies. We have had extensive discussions with the Department of Defense (DOD),
and they are paying far greater attention to this concern. In fact, the FY 2011 DOD
Authorization signed into law last October included a provision requiring the Department to submit a report to Congress no later than April 1, 2010, assessing the
usage of rare earth materials in DODs supply chain, looking at projected availability for use by DOD, the extent to which the DOD is dependent on rare earth
materials, steps that the Department is taking to address any risks to national security, and recommendations for further action.
Access to rare earths is obviously essential, but without rebuilding the manufacturing capacity to produce rare earth metals and magnets, the U.S. could find itself
dependent on China for key technological building blocks. But even this scenario
presumes that the U.S. has the manufacturing capabilities to put Chinese rare
earth materials to use in final products. Right now, given the current state of U.S.
manufacturing, it is unfortunately more likely that we would become a raw material
supplier to Chinese manufacturers.
Viewed through this lens, the domestic development of rare earth resources and
manufacturing capabilities is not only a strategic necessity but also a potential catalyst for job growth in the clean energy and advanced technology manufacturing sectors. If these resources and capabilities were built up domestically, it could have a
multiplier effect on downstream, value added manufacturing. Consider Chinas experience. It has to create 1015 million jobs a year just to accommodate new entrants into its job market, and it has viewed the rare earths industry as a magnet
for jobs. China repeatedly attracted high-tech manufacturers to move to its shores
in exchange for access to rare earths among other enticements. The U.S. could experience a similar jobs boost by making a concerted effort to rebuild the clean energy
supply chain, beginning with rare earths, within its borders.
Molycorp Minerals Mining to Magnets Strategy
Molycorp Minerals has been in the rare earths business for 57 years, and while
the company and its facilities have changed ownership over the years, it has remained one of the worlds only viable sources of rare earth minerals. On October
1, 2008, a group of U.S. based investors, including myself, formed Molycorp Minerals, LLC, and we acquired from Chevron its rare earth assets at Mountain Pass,
which the U.S. Geological Survey has deemed the greatest concentration of rare
earth minerals now known. From the outset, we have sought to combine this worldclass rare earth deposit with a mining to magnets strategy. Our redevelopment
of Mountain Pass is the starting point of a broader effort to reestablish domestic
manufacturing of the rare earth metals, alloys and magnets that enable and are indispensable to the clean energy economy and advanced technology manufacturing.
Our work at Mountain Pass provides a timely, well-planned, and economically viable means to address the rare earth access challenges on the shortest timeline possible. While Molycorp has been processing existing rare earth stockpiles since 2007,
it has invested $20 million to begin the restart of active mining. Our team matches
this remarkable natural resource with 57 years of rare earth mining, milling, and
processing experience. We have obtained the necessary 30-year mine plan permit,
and the Environmental Impact Report for the mining-to-oxides portion of the redevelopment has been reviewed and approved by all applicable Federal, state, and
local agencies. Molycorps footprint will be limited to its privately-held land, using
state-of-the-art technologies for water treatment and mineral recovery. Through new
advances in our production processes, Molycorp will produce 20,000 tons, or
40,000,000 pounds, of rare earth oxides per year, and our increased production and
capabilities can potentially create 900 new jobs for the hard hit San Bernardino-Riverside and Henderson-Las Vegas regions of California and Nevada. Molycorp is the
only domestic rare earth provider that stands shovel-ready to create jobs and commence the mining-to-magnets work required to meet multiple customer-specific
product demands.
Access to the raw, rare earth minerals is obviously essential, but as noted earlier,
it resolves only part of the challenge. As part of our mining to magnets development, we will build out the metals, alloying and magnet powder manufacturing capabilities. We would also establish the production of rare earth permanent magnets,
all here in the United States. Our company is uniquely well-positioned to rebuild
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these early steps in the clean energy supply chain and fully extend the value and
capabilities of the rare earth resources at Mountain Pass.
Environmental Stewardship as a Source of Cost-Competitiveness
Many industry observers question how a U.S. producer of rare earths can ever
compete with the Chinese, when the possibility always lingers that the Chinese
could flood the market and dramatically depress rare earth prices, a practice they
have demonstrated previously. We have spent the better part of the past 8 years
developing the answer to this question. We changed the orientation of our thinking
and discovered that by focusing principally on energy and resource efficiency, we
could make major improvements in our cost competitiveness while at the same time
advance our environmental stewardship.
We will incorporate a wide variety of manufacturing processes that are new to the
rare earth industry, which will increase resource efficiency, improve environmental
performance, and reduce carbon emissions. Specifically:
Our overall processing improvements will almost cut in half the amount of
raw ore needed to produce the same amount of rare earth oxides that we have
produced historically. This effectively doubles the life of the ore body and further minimizes the mines footprint;
Our extraction improvements will increase the processing facilitys rare earth
recovery rates to 95% (up from 6065%) and decrease the amount of reagents
needed by over 30%;
Our reagent recycling, through proprietary technology that Molycorp has developed, could lead to even greater decreases in reagent use;
Our new water recycling and treatment processes reduce the mines fresh
water usage from 850 gallons per minute (gpm) to 30 gpm a 96% reduction;
Finally, the construction of a Combined Heat and Power (CHP) plantfueled
by natural gaswill eliminate usage of fuel oil and propane. This will significantly reduce the facilitys carbon emissions, reduce electricity costs by 50%,
and improve electricity reliability.
These process improvements fundamentally reverse the conventional wisdom that
superior environmental stewardship increases production costs. At the same time,
we significantly distinguish ourselves from the Chinese rare earth industry that has
been plagued by a history of significant environmental degradation, one that it is
just beginning to recognize and rectify.
Need for Federal Leadership
Over the past year, I have spent a significant amount of time in Washington
meeting with Members of Congress and their staffs as well as officials in a variety
of Federal agencies to direct greater attention to this issue. Im pleased to report,
just over one year since we began our efforts, that the Federal Government is beginning to take meaningful steps toward understanding and addressing our rare earth
vulnerabilities. The question remains, however, if it will be able to make its assessments, determine the required actions, and execute them within a timeline that
seems to be accelerating daily.
In each of these meetings, and as this Committee has also inquired, I am asked
what role the Federal Government should play in tackling this pressing concern,
and I believe that there are 4 areas where it can have the greatest near- and longterm in impact: 1) federally based financing and/or loan guarantee support for highly capital intensive projects like ours; 2) assistance rebuilding Americas rare earth
knowledge infrastructure (university-based rare earth research, development of academic curricula and fields of study, training and exposure to the chemical and physical science related to rare earths, etc.); 3) increased interagency collaboration at the
highest levels on the impact of rare earth accessibility on major national objectives;
and 4) funding competitive grants for public and private sector rare earth research.
Ill explore each in greater depth below:
Financing support: Given the size, scale, ambition, and necessity of
Molycorps redevelopment efforts, we submitted an application for the Department of Energys Loan Guarantee Program (LGP). We believed that the program was well-suited for our project, particularly given that the projects substantial implications closely match the programs paramount objectives. Traditional bank financing in the current climatewith very short repayment periods and interest rates near double digitsis not economically feasible. The
LGP offers longer term financing and lower interest rates and would allow
56
Molycorp to accelerate development in the near-term while ensuring rare
earth resource availability in the long term. However, the DOE summarily rejected our application in December, saying that the project did not qualify as
a New or Significantly Improved Technology. We reviewed the relevant portion of the Rule, Section 609.2, and our project meets every one of the stated
criteria. We requested further discussion with the DOE to understand how it
came to its conclusion and how Molycorp might proceed. After almost two
months, the DOE finally responded to our request. During the meeting, the
DOE contended that this project goes too far upstream and that the program was not intended to cover mining projects. We have yet to find the legislative or regulatory language that provides such a limitation. However, it appears we may need to ask Congress for legislative direction or possibly new
legislative language specifically authorizing the use of loan guarantees for
strategically important projects like this. Our frustrations with the loan guarantee notwithstanding, I still believe that this kind of financing support is exactly what a project like ours needs. We will be in a very strong position to
both raise our portion of the capital to execute the project and repay the loan
well-within the required timeline. We will continue to pursue this financing
support despite the DOEs current position.
Rebuilding the rare earth knowledge infrastructure: The United States
used to be the worlds preeminent source of rare earth information and expertise, but it has ceded that advantage over the past decade, as its position in
the industry has become subordinate to China and other countries in East
Asia. The Federal Government, and the House Science and Technology Committee in particular, can play a pivotal role in reestablishing that institutional knowledge and expertise and sharing it with a wider audience of researchers, scholars, and practitioners here in the U.S. and abroad. At
Molycorp, we are fortunate to have a team of 17 rare earth researchers and
technologists who are second to none in the world, but almost all of them had
no previous expertise in rare earths prior to joining Molycorp. It will be difficult for the U.S. to reestablish its preeminence without a concerted effort to
attract the brightest scientists and researchers to the field of rare earths. Rebuilding the knowledge infrastructure and the research support will go a long
way toward that goal. Dr. Gschneidner, who Im honored to testify with today,
is regarded as the father of rare earths, and his work at Ames Laboratory
and Iowa State University as well as the great work being done by Dr. Eggert
and his colleagues at the Colorado School of Mines can serve as the foundation on which to expand Americas rare earth expertise. As a reminder of the
rest of the worlds interests and actions in this regard, the Korea Times recently reported that Korea is developing rare earth metals for industrial use
at a government-funded research center.
Interagency Cooperation: Over the past several months, we have been
very pleased to learn about efforts within many Federal agencies to direct
specific attention to rare earth issues. We have been in direct contact with
the Departments of Defense, Commerce, and State, and each is examining
this issue within the unique context of their agencies work. It is also worth
noting that the Commerce Department convened a group of stakeholders from
both the government and the private sector in December, 2009, which included representatives from DOD, GAO, USTR, and OSTP. We have also had
multiple discussions with the Office of Science and Technology Policy directly
and have been very appreciative of their engagement on this issue. In fact,
OSTP, along with Commerce, is facilitating interagency collaboration going
forward. While we are encouraged by these recent efforts, it is our hope that
the agencies and the White House recognize that the global supply-demand
challenges are approaching at an increasingly rapid pace and that their efforts should reflect the requisite urgency.
Funding support for rare earth research: Part of Chinas success in
growing and dominating the market for rare earths can be attributed to their
efforts to find and commercialize new applications for rare earth materials.
Federal funding support for competitive grants specifically directed at, rare
earth research will help to expand the U.S.s ability to do the same. This has
the potential to broaden the economic impact of rare earths, and contribute
to the goal mentioned above of reestablishing Americas superior expertise in
rare earth research.
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Conclusion
The global rare earth supply concerns facing the U.S. and all other countries outside China are obviously disconcerting, but they are not insurmountable. A combination of geologic good fortune and an accelerated effort to ramp up domestic production and rebuild lost manufacturing capabilities could provide a solution for the U.S.
and ensure that our leading national objectives are not jeopardized. At Molycorp,
our mining to magnets strategy is far more than an approach to a new business,
it is a cause with far reaching implications. If executed effectively, it could prove
to be catalytic for our development of a clean energy economy and the resurgence
of domestic manufacturing. This project will have meaningful and significant impact
on leading national priorities, and as such, we stand ready to work with Congress
and the Administration to find ways to accelerate our work at Mountain Pass and
bring these needed capabilities online as soon as possible.
Thank you once again for the opportunity to share my perspective on rare earths,
and I look forward to working with the Committee in the weeks and months to come
as it continues to examine this important topic and determine potential actions.
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61
BIOGRAPHY
FOR
MARK A. SMITH
Mark A. Smith is Chief Executive Officer, member of the Board of Directors and
a shareholder of Molycorp Minerals, LLC. Prior to Molycorp Minerals, Mr. Smith
was the president and chief executive officer of Chevron Mining Inc. a wholly-owned
subsidiary of Chevron Corporation. Mr. Smith was appointed President and Chief
Executive Officer in April 2006. Chevron Mining Inc. operated five mines one of
which was the Mountain Pass, CA Rare Earth mine.
Prior to this appointment, Mr. Smith was a vice president for Unocal Corporation,
where he was responsible for managing the real estate, remediation and mining divisions. Mr. Smith worked for Unocal for over 22 years.
Mr. Smith received his Bachelor of Science degree in agricultural engineering
from Colorado State University in 1981 and his Juris Doctor, cum laude, from Western State University, College of Law, in 1990. He is a registered professional engineer and an active member of the State Bar of California and Colorado. Mr. Smith
and his wife live in Denver, Colorado.
Chairman MILLER. Thank you, Mr. Smith. Dr. Broun and I are
worried what percentage of rare earths the Chinese will control
by
Mr. SMITH. It is growing every day.
Chairman MILLER. the end of the hearing.
Mr. SMITH. 97.3 to be precise.
Chairman MILLER. Mr. Stewart for five minutes.
62
STATEMENT OF MR. TERENCE STEWART, ESQ., MANAGING
PARTNER, STEWART AND STEWART
Mr. STEWART. Mr. Chairman, members of the Subcommittee,

good afternoon. Chinas policy on rare earth minerals is similar to
that nations actions on a large number of other raw materials. The
general goals seem to be reducing availability of supply for global
customers as well as making foreign purchases more expensive
through the imposition of export duties, export licenses and other
trade-impeding measures. Chinas policy encourages foreign investors to move production and investment to China and ensures low
price supplies for targeted rapid-growth sectors within China.
Last year the United States filed a WTO case against Chinas export restraints on numerous raw materials critical to U.S. manufacturers and workers. The raw materials subject to export restraints are used in some of the key industries identified in Chinas
industrial policies such as steel, aluminum and chemicals. Chinas
most recent 5-year plan, which goes through 2010, continues to
focus development in certain strategic sectors and to ensure a leading role for state-owned enterprises in many of those sectors.
Recently the European Chamber in China reviewed the massive
problems of overcapacity in a number of important industries in
China including steel, aluminum, cement, chemicals, oil refining,
wind power equipment, shipbuilding, flat glass and photovoltaics.
This overcapacity, coupled with export restraints on key raw materials, effectively shifts the burden of adjusting global excess capacity from China to trading partners by limiting access to affordably
priced key raw materials. Moreover, limiting access to key raw materials can be used to force investment within China.
According to the 2009 U.S.-China Economic and Security Review
Commission in an annual report to Congress, China is targeting
rare earth dependent components of key strategic industries for
production within China including many of the green technologies
reviewed earlier. China is attempting to make significant cuts to
rare earth exports through a combination of export duties and export quotas. These actions are intended to raise prices outside of
China, and in an indication that commissions reach the common
number, they found that China currently produces 93 percent of
rare earth minerals, somewhere between 90 and 97
Chairman MILLER. The trend is heading in the right direction
now.
Mr. STEWART. Chinas export restraints have understandably
caused concern in many countries, including our own.
So what can be done? First and foremost, the United States and
its trading partners should bring a second trade action against
China on the range of export restraints being imposed on rare
earth minerals. Such restraints are in clear violation of obligations
that China undertook to become a member of the World Trade Organization in 2001. At that time, China agreed to limit the use of
export taxes to 84 product categories, none of which included rare
earth minerals. In 2010, China is imposing export taxes not on 84
products, but on 329 product categories including 23 rare earth
mineral categories, a plain violation of their commitments.
On the domestic front, it is my understanding that both the government and the private sector are taking actions to understand
63
the nature of the potential problems as well as looking for alternative sources of supply. For example, the National Defense Authorization Act for Fiscal Year 2010 7 requires the Comptroller
General to deliver a report by this April 1st on rare earth materials
in the defense supply chain.8 Obviously, understanding the national security implications of Chinese rare earth policies is critical.
The Chairman and Members of this Subcommittee might want to
advocate creation of a similar report for the civilian sector to help
Members of Congress understand the challenges facing the American economy from the current reliance on Chinas supply and what
legislative approaches might be pursued to safeguard our commercial as well as our military interests.
A positive trend in recent years has been renewed interest in developing rare earth mineral resources outside of China including in
North America, obviously the Molycorp example being one of the
key elements. Reports are encouraging, although cost structures
with environmental needs versus China remain important challenges. The Government through the Committee on Foreign Investment in the United States must help ensure that mines in the
United States are not purchased by foreign interests whose governments have limited supply to U.S. users and that any new mines
receive priority attention in terms of various government licenses
and reviews.
Finally, the USGS indicates that for most rare earth minerals
there are substitute products available, although known substitutes
are less effective currently than the rare earth minerals themselves. The United States Government can support efforts to develop alternative solutions to current rare earth needs, both
through publicly financed research and through tax policies and
other actions to support private sector research.
Thank you very much.
[The prepared statement of Mr. Stewart follows:]
PREPARED STATEMENT
OF
TERENCE STEWART
Mr. Chairman and members of the Subcommittee. Good afternoon. I am pleased

to appear this afternoon as part of your hearing on rare earth minerals and 21st
century industry to try to address three questions that I understand are of interest
to the Subcommittee:
1. How do Chinese actions in the rare earths sector fit into Chinas policies on
strategic industries and economic development?
2. Are there policies that the Federal Government can adopt, or strategies that
the U.S. private sector can adopt, that can help assure a consistent and sustainable domestic supply of economically and militarily critical materials
such as rare earths?
3. Are there policies that the Federal Government can adopt, or strategies that
the U.S. private sector can adopt, that would support firms dependent on
rare earth elements to retain their manufacturing capacity in the U.S.?
Let me start with some acknowledgments on my limitations as a witness on rare
earth minerals. First, my background and expertise is on international trade law
matters, including the World Trade Organization, and manufacturing competitiveness issues. Others on the panel today are the experts on minerals in general or
rare earth minerals policies.
7 Public
8 See
Law 11884; enacted October 28, 2009. The study was authorized in Section 843.
GAO Report GAO10617R (April 14, 2010).
64
Our firm, over the years, has looked at many aspects of the U.S.-China relationship and has prepared for the U.S.-China Economic and Security Review Commission various studies looking at the trade and manufacturing impacts of Chinas
practices. For example, on March 24, 2009 I testified at a hearing before the Commission on Chinas Industrial Policy and its Impact on U.S. Companies, Workers
and the American Economy.
Rare earths are not part of the current WTO challenges brought by the U.S., the
EU and Mexico of Chinas export restraints on various materials. (see WT/DS394/
1, ChinaMeasures Related to the Exportation of Various Raw Materials, request
for consultations by the United States) Purchasers of rare earths are concerned
about similar types of restraints imposed by China on rare earth minerals and that
there have been discussions by the U.S. with key allies about a possible future case.
Inside U.S.-China Trade, October 21, 2009, U.S. and Allies Discuss Rare Earth
Metals Action at WTO.
Now let me turn to the questions of interest to the Subcommittee.
Chinas Actions on Rare Earth Minerals
What China is doing on rare earth minerals mirrors what it is doing on a large
number of other raw materials: reducing availability of supply for global customers
and/or making purchases more expensive through the imposition of export duties,
export licenses, etc. The objective can be to encourage foreign investors to move investment to China to produce downstream products in the Middle Kingdom versus
overseas, or to ensure low priced supplies for sectors in China targeted for rapid industrial growth.
Chinas most recent five-year plan (covering 200610) continues to focus development in certain sectors and to ensure a leading role for state-owned enterprises
(SOEs) in certain sectors.
Specific guidance regarding SOEs was provided in December 2006 by the National
Development and Reform Commission (NDRC) when it issued a guiding opinion on
state-owned assets restructuring. The opinion states that SASACs state-owned assets should concentrate on important industries and key areas (i.e., strategic industries). The opinion then explained that the important industry and key areas
shall mainly include industries that involve national security, large and important
infrastructures, important mineral resources, important public utilities and public
services, and key enterprises in the pillar industries and high-tech industries.
Seven important industries and key areas were identified: defense, electric power
and grid, petroleum and petrochemical, telecommunications, coal, civil aviation, and
shipping. Basic and pillar industries where the state would also maintain an important role included equipment manufacturing, auto, information technology, construction, iron and steel, non-ferrous metals, chemicals, and surveying and design.
The counterpart to rapid development of key industries is maintaining low prices
and ready availability of key raw materials. Not surprisingly, the cases filed by the
US, the EU and Mexico against Chinese export restraints on certain raw materials
involve raw materials used in some of the key industries identified in Chinas industrial policiessteel, aluminum and chemicals. As the USTR press release of November 28, 2009, announcing the panel request against China indicated, The materials
at issue are: bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon
carbide, yellow phosphorus and zinc, key inputs for numerous downstream products
in the steel, aluminum and chemical sectors across the globe.
A corollary to keeping prices at home low is the ability to force trading partners
to shutter capacity in downstream industries. For example, a study came out in December 2009, published by the European Chamber, entitled Overcapacity in China:
Causes, Impacts and Recommendations. http://www.europeanchamber.com.cn/
view/static/?sid=6388. The European Chamber in China reviewed the massive
problems of overcapacity in a number of important industries including steel, aluminum, cement, chemicals, refining, wind power equipment, ship building, flat
glass, and photovoltaics. While the causes of overcapacity in China are varied as reviewed in the study, when coupled with export restraints on key raw materials,
China can apply pressure on trading partners to make the adjustments for excess
capacity created in China by limiting access at affordable prices to key raw materials or preempting development of key new technologies in the U.S. and elsewhere.
And control of key raw materials can be used to attract foreign investment by limiting access to such materials to those with a local presence. As discussed on one
Web site, China is apparently offering to give ample supplies of rare earth minerals
to companies that invest in China, even as China moves to limit or eliminate availability of product for export.
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Chinese officials have made it very clear: If foreign manufacturing companies
move their facilities to China, they will be guaranteed a steady supply of rare
earths. Many technology companies are reluctant to do this because they want
to protect their intellectual property, but will the temptation of an endless REE
supply be too much? Companies continue to move operations to China, but the
tension still exists.
Clint Cox, The Anchor House, Inc. (Research on Rare Earth Elements), December
17, 2009, http://theanchorhouse.com (page 5).
When one looks at China, one sees all of the effects and/or purposes behind the
wide ranging export restraints applied to rare earths and other materials. A series
of articles in the last four months of 2009 reflects a range of concerns and purposes
behind the draft 20092015 Rare Earth Industry Development Plan from the Ministry of Industry and Information Technology:
[A]s early as 1998, China has started to limit the export quantities of rare earth
products, and implemented the differentiating principle of forbid, encourage,
and restrict: forbid the export of rare earth raw materials; restrict oxides and
metals by using export quota; encourage downstream rare earth products, such
as high value-added products like magnetic materials and fluorescent powder.
However, under the increasing global demand and Chinas increasingly reduced
number of eligible export companies and export quotas, some companies with large
quotas started to sell their quotas illegally. In addition, some developed countries
companies started to invest and establish factories in tungsten, antimony, and other
rare earth reserves areas, bought large quantities of raw materials, processed them
simply before shipping them overseas for further processing or storage, thereby effectively evaded Chinas export control. From 1990 to 2008, Chinas rare earth export grew almost 10 times, but the average export price has lowered to about 60%
of the original price.
All these demonstrate that Chinas rare earth industry has three serious problems: overcapacity, disorderly competition, and cheap export on a large scale. It is
of great urgency that we protect our rare earth resources and establish our reserve
system.
MIITs 20092015 Plan aims to macro-manage the rare earth industry, strengthen
the control of strategic resources, and strictly control production capacity, by both
administrative and market means. In the next six years, no new rare earth mining
penult will be approved, separation of newly formed rare earth smelting companies
will be strictly reviewed, and existing rare earth companies will be eliminated [by
judging their performance] in the three areas of technology and equipment, environmental protection, and management.
At the same time, industry access standards will be higher, elimination of outdated capacity will be accelerated through shut down, pause, merger, transfer.
Promote merger and reorganization of companies, strengthen and enlarge rare earth
industry, form leading rare earth companies, establish a China Rare Earth OPEC,
form companies with absolute dominating power in the market so that China can
be the leader in controlling international market price.
Of course, to accomplish this, merely depending on controlling resources and export is not enough. More importantly, we must grasp rare earth core technology patents, rare earth application market, rare earth products standards. Therefore, we
must start from the technology innovation, invest more in technology, and at the
same time value intellectual property, implement IP strategies, and seize the commanding ground of technology. Break out of the technology restrictions of foreigninvested enterprises, and establish our own rare earth high-way industry chain.
200915 Rare Earth Industry Development Plan Has Been Passed, Hardware
Business Web site (an electronic business Web site formed by Wenzhou Shengqi
Internet Technology, Co., Ltd.), November 6, 2009 (unofficial translation).
China is attempting to make significant cuts to both rare earth exports. China
has implemented its program to limit foreign availability of rare earths through a
combination of both export duties and export quotas. These actions will raise prices
outside of China by curtailing supplies and by raising import prices (with all relevant taxes or duties).
The quota for rare earth materials was 31,300 MTs in 2009, down 8.33% from
2008. This is the fifth year since China started decreasing its rare earth export.
As a corresponding policy to the annual 35,000 MTs quota from 2009 to 2015
proposed by MIIT, China will restrict its mineral annual production to 130,000
to 170,000 MTs and its rare earth smelting products production to 120,000 to
150,000 MTs from 2009 to 2015.
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200915 Rare Earth Industry Development Plan, China Suppliers Web site
(under the guidance of State Council Information Office, Internet Promotion Division; MOFCOM Department of Market Operation Regulation; National Development
and Reform Commission, International Cooperation Center), September 4, 2009 (unofficial translation).
For 2010, the Chinese export duty and quota programs are reviewed in a series
of documents issued in late 2009.
Included as Exhibit 1 to this testimony is an unofficial translation of the export
duty rate chart for 2010, which is an attachment to a notice titled State Council
Customs Tariff Commissions Notice on the Implementation of the 2010 Tariff
Schedule, Customs Tariff Commission Pub. [2009] No. 28, December 8, 2009. The
exhibit shows export duties being assessed on 329 products in 2010 including many
rare earth items (e.g., items 47, 8992, 122139 (export duties of 1025%)).
Exhibit 2 to this testimony is an unofficial translation to the Ministry of Commerce of the Peoples Republic of China (MOFCOM) Trade Letter [2009] No. 147,
December 29, 2009, 2010 1st Batch Export Quota Distribution for Rare-Earth Materials in General Trade. The total quota for the 1st batch is 16,304 MT, with
allocations given to twenty-two companies. A month and a half earlier, MOFCOM
had published Notice on Application Criteria and Procedures for 2010 Rare-Earth
Materials Export Quota. MOFCOM Pub. [2009] No. 94, November 6, 2009. An unofficial translation is included as Exhibit 3.
The U.S.-China Economic and Security Review Commission (USCC) has done
great work summarizing the general problem of export restrictions found in China
as well as the USCCs understanding of how this problem plays out with rare
earths. I have quoted the USCC at length because nobody has synthesized this data
better. A complete excerpt of the USCCs views from its 2009 Report to Congress
is available in Exhibit 4.
Regarding Chinas general export restrictions, the USCC states in its 2009 Report
to Congress,
Export restrictions or export quotas, especially on energy and raw materials,
have two general effects: First, they suppress prices in the domestic market for
these goods, which lowers production costs for industries that use the exportrestricted materials; and second, these restrictions increase the world price for
the raw materials that are affected by limiting the world supply, thereby raising
production costs in competing countries.
U.S.-China Economic and Security Review Commission (USCC) 2009 Report to
Congress, at 62. Available at http://www.uscc.gov/annualreport/2009/annualreportfull 09.pdf.
While specifically addressing Chinas restrictions on the export of rare earth minerals, the USCC notes,
China appears to be tightening its control over the supply of rare earth elements, valuable minerals that are used prominently in the production of such
high-technology goods as flat panel screens and cell phones, and crucial green
technologies such as hybrid car batteries and the special magnets used in wind
turbines. USCC 2009 Report to Congress, at 63.
This reduction in supply by China is problematic because, according to the USCC,
China accounts for the vast majority93 percentof the worlds production of rare
earth minerals, and for the last three years it has been reducing the amount that
can be exported. 2009 Report to Congress, at 63. China admits that rare earth elements are the most important resource for Inner Mongolia, which contains 75 percent of Chinas deposits. Id. Accordingly, the USCC cautions that by limiting exports
and controlling production, the Chinese government is attempting to consolidate its
rare earths industry, with the aim of creating a consortium of miners and processors
in Inner Mongolia. Id. And according to the USCC, these tighter limits on exports
of rare earths will place foreign manufacturers at a disadvantage compared to the
domestic producers, whose access will not be so restricted. Id.
Policies and Solutions for Government and Private Sector Consideration
First and foremost, the U.S. and its trading partners should be considering a second trade action against China on the range of export restraints being imposed on
rare earths (and possibly other products). The U.S. and others were concerned about
Chinas use of export restrictions during Chinas negotiations for accession to the
World Trade Organization. China agreed to limit the use of export taxes to 84 product categories (none of which included rare earth items) at rates no higher than included in Annex 6 of the Protocol of Accession. The fact that in 2010 China has im-
67
posed export taxes on 329 product categories, including twenty-three rare earth categories, creates a strong case of violation by China on the export taxes alone. Other
violations from the use of export quotas are likely as well. Hopefully, Congressional
interest will help move the Administration towards a second case on an expedited
basis.
On the domestic front, it is my understanding that both the government and the
private sector are taking actions to understand the nature of the potential problems
as well as looking for alternative sources of supply.
For example, it is my understanding that the National Defense Authorization Act
for Fiscal Year 2010, Public Law 11184, requires the Comptroller General to deliver a report to the House and Senate Committees on Armed Services by April 1st
this year on rare earth materials in the defense supply chain. Section 843, 50 USC
app. 2093 note. The nature of the report suggests that it is likely to provide important options that should be considered by the Government to safeguard the military
needs of the country moving forward in this area. Section 843(b) is reprinted below:
(b) Matters Addressed.The report required by subsection (a) shall address at
a minimum, the following:
(1) An analysis of the current and projected domestic and worldwide availability of rare earths for use in defense systems, including an analysis of
projected availability of these materials in the export market.
(2) An analysis of actions or events outside the control of the Government
of the United States that could restrict the access of the Department of Defense to rare earth materials, such as past procurements and attempted
procurements of rare earth mines and mineral rights.
(3) A determination as to which defense systems are currently dependent
on, or projected to become dependent on, rare earth materials, particularly
neodymium iron boron magnets, whose supply could be restricted
(A) by actions or events identified pursuant to paragraph (2); or
(B) by other actions or events outside the control of the Government of
the United States.
(4) The risk to national security, if any, of the dependencies (current or projected) identified pursuant to paragraph (3).
(5) Any steps that the Department of Defense has taken or is planning to
take to address any such risk to national security.
(6) Such recommendations for further action to address the matters covered
by the report as the Comptroller General considers appropriate.
Historically, the U.S. maintained a strategic stockpile of critical materials for national defense. Presumably, one of the issues that will be addressed in the report
is the extent to which stockpiling rare earth materials is appropriate or feasible.
The Chairman and Members of this Subcommittee might want to advocate creation of a similar report for the civilian sector. Such a report would obviously be
helpful to Members of Congress in understanding the challenges facing the American economy from the current reliance on China as the source of supply and what
legislative approaches might be pursued to safeguard our commercial and military
interests.
Press accounts suggest that in recent years there has been renewed interest in
developing rare earth mineral resources outside of China and that several mines are
in the process of being reactivated or developed. See, e.g., New USGS Rare Earth
Report Includes Thorium Energy, Inc., Earth Times, Oct. 8, 2009; http://
www.earthtimes.org/articles/show/new-usgs-rare-earth-report-includes-thorium-energy-inc,991131.shtml; Canadian firms set up search for rare-earth metals, New
York Times, Sept. 9, 2009, http://www.nytimes.com/2009/09/10/business/global/
10mineral.html?r=1&scp=10&sq=br
Possible American sources of rare-earths include a separation plant at Mount
Pass, CA. Bastnasite concentrates and other rare-earth intermediates and refined
products continue to be sold from mine stocks at Mountain Pass. Exploration for
rare earths continued in 2009; however, global economic conditions were not as favorable as in early 2008. Economic assessments continued at Bear Lodge in Wyoming; Diamond Creek in Idaho; Elk Creek in Nebraska; and Lemhi Pass in IdahoMontana.
Thus, government and the private sector may have additional sources of supply
of rare earths beyond China, although the challenge may be overall cost of supply,
particularly in countries like the U.S. or Canada where environmental needs are
more likely to be addressed at present than in China.
68
Presumably, the government, under CFIUS, can help ensure that mines in the
U.S. are not purchased by foreign interests whose governments have limited supply
to U.S. users and that new mines receive priority attention in terms of various government licenses and reviews.
I note that the Senate Committee on Energy and Natural Resources held a hearing last summer on mining law reform. The hearing had a number of witnesses who
talked about the ability to improve the U.S. ability to supply more of its rare earth
mineral needs and what challenges they faced based on various pending bills. Mining Law Reform, S. Hrg. 111116, 111th Cong., 1st Sess. (July 14, 2009)(S. 796; S.
140). Certainly, the Congress will want to be sure that any legislation balances our
needs for access to critical raw materials with the other concerns prompting legislative modifications.
Finally, the USGS indicates that for most rare earth minerals there are substitute
products available, although known substitutes are less effective than the rare earth
minerals. The U.S. government can support research efforts into the development
of alternative solutions to current rare earth needs both directly through basic and
applied research and through tax policies and other actions to support private sector
research.
Thank you for the opportunity to appear today. I would be pleased to respond to
any questions.
BIOGRAPHY
FOR
TERENCE STEWART
Terry Stewart is the Managing Partner of Stewart and Stewart. Mr. Stewarts
practice focuses on international trade matters (litigation, negotiations, policy) and
customs law. He has worked with various U.S. industries and labor unions to solve
trade matters in the U.S. and abroad, including representing agricultural, industrial
and services groups. He is a currently a member of the Advisory Council to the U.S.
Court of Appeals for the Federal Circuit and a member of the Steering Group of
the International Trade Committee of the American Bar Associations International
Law Section. Mr. Stewart is one of Americas leading academic experts on the WTO
system and has advised several governments on their WTO accession processes.
In recent years, Mr. Stewart has written extensively on trade relations with the
Peoples Republic of China, including volumes on the WTO accession commitments
undertaken and progress made in meeting those commitments over time, a review
of intellectual property protection within China and steps being taken to address
problems in enforcement, and reports on subsidies provided to major sectors of the
Chinese economy.
Mr. Stewart is the editor of the 2009 book, Opportunities and Obligations: New
Perspectives on Global and U.S. Trade Policy; and author and editor of numerous
other publications. Previously, he was best known for editing a four-volume treatise
on The GATT Uruguay Round: A Negotiating History (198692)(Vols. IIII); and The
End Game (Vol. IV) published in July 1996 by the American Bar Association.
Mr. Stewart is an adjunct professor at Georgetown University Law Center where
he currently teaches a graduate seminar on the WTO. He received his law degree
from Georgetown University, his masters in Business Administration from Harvard
University, and his bachelors from the College of the Holy Cross.
Chairman MILLER. Thank you, Mr. Stewart. At this point we will

begin our first round of questions. Typically I would recognize myself, but I would be happy to recognizewell, I will do what is typical then. I will recognize myself for five minutes.
EARLY WARNING
FOR
MATERIAL SUPPLY PROBLEMS
The questions are probably somewhat redundant to your oral testimony, but we did pass a law 30 years ago that called upon the
President to establish early warning systems for material supply
problems. That didnt work. That is why we are having this hearing today. What would have been needed to warn us about the
problems that we have with rare earth, with the Chinese controlling 90, 93, 95, 97, way too much of the earths supply, at least
commercially available rare earths? And how do we keep everyone
interested in the materials issues when there ceases to be a crisis?
That is sort of a problem with Congress. There is either complete
69
inactivity or frenzy, with little in between. How can we keep our
attention on the need for the necessary supply of rare earths? Any
of you may begin. Mr. Smith?
Mr. SMITH. Thank you, Mr. Chairman. I think that the answer
rests in the ability to look at things from a full supply chain concept. It is very difficult to talk to people about rare earths in the
world today. We go and talk to defense contractors that work for
the Department of Defense, and sometimes we have to go down
nine different tiers before we find the party that actually purchases
the rare earths. So I dont think that anybody has done anything
intentionally here, but these things are very ubiquitous, they only
use very, very small quantities, and I think we have to continue
to look at things on a full supply chain basis, not on an elementby-element basis.
Chairman MILLER. Dr. Freiman?
Dr. FREIMAN. We argued, in the report that I spoke to, that one
of the things that was neededand I spoke to it when you saw the
diagramthat what is needed is up-to-date data that we can rely
on. As you hear, technology moves quickly and changes in availability move quickly as well. And we felt that what was needed was
an agency which had the autonomy and the authority to collect the
necessary data, rapidly, and to disperse that to the people who
need it so that you could keep up-to-date on what was really the
situation with respect to not just rare earths but, in our case, many
of the critical minerals.
Chairman MILLER. Dr. Duclos?
Dr. DUCLOS. I would certainly agree with that, and as I said in
my verbal testimony, you know, appointing a lead agency that is
able to do that assessment is absolutely criticalbut recognize that
the assessment itself is just a very start and represents a relatively
small part of actually solving the problem, which will involve bringing in the research into the various areas that I describe in my
verbal testimony.
The issue with the rare earths came on very gradually through
the 90s, systematically but gradually, and I think without an agency assessing these things quantitatively over time, you wont see
these gradual increases in the crisis level unless you do that.
Chairman MILLER. Anyone else? Dr. Gschneidner?
Dr. GSCHNEIDNER. I would just sort of like to recite a little bit
of history concerning Magnequenchwhich was established by
General Motors, of course, to make motors for the magnets and so
forth. Eventually, the Chinese bought a good percentage of that,
and they didnt think too much about it. Then as they got a higher
percentage of it, the union in Anderson, Indiana, said that they
were opposed to this thing. The Chinese said, well, we wont move
the factory out of Anderson for five years. Well, when the fifth year
came up, right at the end of the time, they moved everything, lock,
stock and barrel, out of Anderson, Indiana. So we lost lots of jobs.
And the reason why I know that is a number of my students and
post-docs have worked there at Magnequench. And so we know
what happened to that, and I think the government probably
should have interfered and said, no, we are not going to allow you
to sell the whole thing. But again, it is the same thing as the other
70
gentleman made. How do you get the warning signal out to the
government to stop this sort of action?
HOW
TO
COMPETE WITH CHINA
Chairman MILLER. Thank you, Dr. Gschneidner. Mr. Smith,

Molycorp has to compete in a market economy. China doesnt play
by those rules and are quite willing to subsidize, provide funds, to
develop, to mine, to make commercially available rare earth minerals to gain a strategic advantage. Is being in a subsidy war the
only response that we have to the way China plays?
Mr. SMITH. Absolutely not, Mr. Chairman. I think our best attack
is actually technology. Molycorp sat for about ten years when the
Chinese came in and flooded the United States rare earth markets
with lots of product and low prices. We sat there for about ten
years and whined and cried about the low wages that the Chinese
had to pay, et cetera. We finally got over that, and we used our
own American ingenuity to figure out process technologies that
drastically cut our costs in producing these materials, and we feel
that with these new technologies, we can in fact be the lowest-cost
producer in the world. But we do need help in that regard. I have
17 scientists and engineers that are competing with over 6,000 Chinese scientists, and I cant find any students from any university
in the United States that have any rare earth experience or curricula today.
Chairman MILLER. My time is expired, and I recognize Dr. Broun
for five minutes.
PRIORITIZING RESPONSES
TO
SHORTAGE
Mr. BROUN. Thank you, Mr. Chairman. Todays testimony highlighted several themes for rare earth research and development.
We have heard about the need to reconstitute our Nations rare
earth knowledge base and infrastructure. Witnesses have highlighted the need to find new applications and uses for rare earths
as well as identifying efficiencies in its production.
We have also heard of the need to find substitutes and technologies that greatly reduce the use of rare earths. We probably
wont all agree on how to prioritize these topics as I doubt Mr.
Smith will want to focus on eliminating the need for a product that
his company has invested hundreds of millions of dollars in developing. Understanding that you may disagree, how would you
prioritize these topics and are there any additional areas of focus
you would suggest? We will start here and go down. Dr. Freiman?
Dr. FREIMAN. Well, I think prioritizing is quite difficult, and I
wont attempt to do that. But one of the main outcomes of our committee was a recognition that what we can do in helping not just
rare earth but other critical minerals is, as I mentioned earlier, is
to know well in advance what the change in the availability will
be, and I think that is a critical point.
We also emphasized the need for more research and development
and more coordination between agencies in what is going on so we
understand what each other is doing. As most of you know, there
was this coordination present, certainly I know in the materials
area, for many years and it sort of has disappeared at the OSTP
71
level. And putting that back together again and developing that
kind of agency coordination in research and development, certainly
in rare earths, and we hear that that is starting to go on now, but
in other critical minerals I think is an important factor.
Dr. DUCLOS. I would like to point out that there are 17 rare
earths in the periodic table, and each one of its applications is different. And the solution will be different for each one of the 17.
And with that in mind, that is why we recommend the five solutions, going from certainly developing new sources, all the way to
developing technologies that eliminate the use. It will be different,
and we have seen within GE on materials not necessarily dealing
with rare earths but other rare elements.
They have to take a number of the solutions in order to make
it all work. So I dont think there is a single answer to the question
except that all five of these areas of work are absolutely needed.
Mr. BROUN. Anybody else? Mr. Smith?
Mr. SMITH. Thank you. I would concur with Dr. Duclos. I think
that we have to balance the many needs of the rare earth world,
and we are not adverse to finding substitutes for rare earths, either, contrary to what may seem quite obvious.
But on the other hand, I can use the rare earth magnets as an
example. The permanent rare earth magnets, the neodymium-ironboron type, have been around for well over 20, close to 30 years
now. We have been researching for this entire time for a substitute
for those magnets, and we havent found one yet. But that doesnt
mean that we should stop. The problem we have in between is that
we have got about a two- or three-year window here before a major
supply gap occurs between what China can supply to the rest of the
world and what the rest of the world needs for their own needs.
And we need to prioritize that right now as an immediate need
that we have to address because the research will take a lot of
time. But we certainly advocate research on all aspects, including
replacement.
Mr. BROUN. Mr. Stewart, quickly. I have about run out of time.
I have another question or two I want to ask.
Mr. STEWART. Just very quickly, while I support those positions,
the WTO process is about a two-year process and should get started immediately to get our trading partners to honor the commitments that they have made as well.
ROLE
OF
FEDERAL AGENCIES
Mr. BROUN. OK. Thank you so much. Dr. Freiman pointed out
in his testimony that the Federal Government should enhance the
types of data and information it collects, disseminates, and analyzes on minerals and on mineral products. His committee also suggested the Energy Information Administration as a model. What
agency or office should be tasked with that responsibility, Dr.
Freiman?
Dr. FREIMAN. I would point out we chose not to select an agency.
We didnt feel that was our business.
Mr. BROUN. No recommendation whatsoever?
Dr. FREIMAN. No. No. We pointed out that whoever was chosen,
they need to have enough authority to be able to demand that they
72
could collect the kind of data and information they need in a timely
manner.
Mr. BROUN. Anybody else want to suggest an agency?
Dr. GSCHNEIDNER. I would suggest the United States Geological
Service. They have done an outstanding job for the last 20 years
of pointing out this problem, with rare earths in particular, and I
think what we need to do is to figure out how to communicate their
results better amongst all the parties.
Mr. BROUN. Thank you. Mr. Chairman, my time is expired. I
yield back.
Chairman MILLER. And now the regular order, the Full Committee Chairman, Mr. Gordon, for five minutes.
Mr. GORDON. Thank you, Mr. Miller. You know, it is somewhat
rare also that Mr. Miller and Dr. Broun can be in such strong
agreement, so I think that we are onto something here and I want
to thank the committee for being here. As Mr. Smith pointed out,
this is the first of these type of hearings, and hopefully this will
pull back the curtain.
Now, in this committee, we dont have jurisdiction on WTO and
some tax benefits and that sort of thing. So I want to try to bring
this discussion back to what we can do here, and listening to you,
it seems that we should appoint or anoint a lead agency to try to
collect and assess data. We need to have some type of research. Although you didnt say it, I would say also workforce in terms of potentially through the National Science Foundation having fellowships and grants for those students that would go into the rare research area.
And so I want to get your suggestions on what else within our
sort of jurisdiction, which is the research and deployment, what
public/private role should be played, and when it comes to research,
is a research center adequate or do you have more than one for
more different elements or do we parcel this around to various universities? How should we approach that? And I will open it up for
the field.
Dr. DUCLOS. One area that this agency could do is actually collect sensitive information. I think you can imagine, for a corporation that has challenges in these areas, it is not exactly something
that we talk about publicly, and therefore the data collection can
be done, for example, by an agency in confidence and then can use
that data to help prioritize the materials that need immediate attention. And so long as that can lead toas I said, the assessing
of the situation is just the first part.
Mr. GORDON. Well, it seems to me if you are collecting data and
trying to determine what is immediate need, you are ten years behind.
Dr. DUCLOS. You know, what you can do, and in fact this is what
we do, we use this criticality diagram matrix that Dr. Freiman discussed to quantify where the elements are on this table, and then
we do that annually, OK? So we can see them moving around. We
can tell generally which direction the elements are going and have
some hope of seeing it a little bit in advance what the
73
IMPROVING RESEARCH INFRASTRUCTURE
Mr. GORDON. Let me go back in terms of research. Would we
want a single research center? Is there already something at NIST
or elsewhere that we would build upon? Do we need to have multiple? Do we need to make this university based and what is the
private/public sector partnerships? What should there be there?
Dr. GSCHNEIDNER. I would like to address that question. First of
all, I dont think you want to spread it out too far because things
you have criticality as far as people, groups, and so forth and I
think advocate a strong center which can then tie together research
that is being carried out at other places and so forth, and I think
a university is a good place to start because you can be training
students which will go into industry eventually and help them out.
I think one thing you dont want to do is divide the rare earth,
the 17 elements, into 17 research centers. Even though they may
be somewhat different, there is a lot of commonality in there which
can be used. I mentioned earlier today that neodymium-iron-boron
magnet here using a new process which is very energy efficient in
green technology. We have also just made last week, made the
measurements on a lanthanum-nickel hydride battery material
which is very competitive with what you can get from industry. So
what we learned there applies to some of the other elements.
So I think a strong center, and it should be well-funded because
if you underfund it, it is not going to do the job you want it to do.
Mr. GORDON. And is there an existing place? Is there an existing
Federal agency again like NIST or a national lab that would be a
lead agency here?
Dr. GSCHNEIDNER. Well, one possibility of course is the Department of Energy because they have already fundingand that is a
critical need in this country, and possibly the military would be another place to fund such a center.
Mr. GORDON. Thank you. I am sorry. We have got a vote on
again.
Chairman MILLER. OK. In our regular order, Ms. Dahlkemper is
recognized for five minutes.
FUNDING
FOR
RARE EARTH RESEARCH
Ms. DAHLKEMPER. Thank you, Mr. Chairman, and thank you to

the witnesses for being here today. A very interesting topic of discussion.
I want to just kind of go on with the Chairmans discussion here,
Dr. Gschneidner. Right now your laboratory is being funded by the
DOE. Where else is the DOE funding this kind of research in this
country?
Dr. GSCHNEIDNER. Well, a smattering of things at Oak Ridge, at
Los Alamos. There is some up in Hanford up in there. There is also
Argonne. You know, there are specialized areas or research where
people are doing this. But there is reallyI mean, we are the most
coherent laboratory devoted to rare earth materials, but there is a
lot of research being carried out. And also they fund a number of
universities. But it is usually one or two groups at a university. It
is very small. It is not critical
74
Ms. DAHLKEMPER. So of the percentage of their dollars going to
this, how much of it would be going to your lab, do you think? Do
you have any idea? Coming out of DOE.
Dr. GSCHNEIDNER. From all of DOE? Well, I will talk from basically
Ms. DAHLKEMPER. You said you are the most concentrated.
Dr. GSCHNEIDNER. Well, our laboratory gets about $16 million.
Maybe 25 percent of that might go into rare earth materials, different people in the laboratory, something like that.
Ms. DAHLKEMPER. Do you think the research is adequate for
what we need to do in terms of energy and
Dr. GSCHNEIDNER. No.
Ms. DAHLKEMPER. Can you give me any idea by how much more
we would need? Do you have any
Dr. GSCHNEIDNER. Well, I think a research center is something
like I mentioned in here of about 30 people, full-time equivalence.
You probably should be funding that center alone by about $5 million per year, something like this with a 5-year lead time to show
that they can produce what they claim they want to do.
Ms. DAHLKEMPER. Dr. Freiman, you wanted to say something?
Dr. FREIMAN. Yes, briefly I was going to say one of the things I
think we dont know is what research has been carried out over the
past few years or even numbers of years in this area of rare earths.
It is scattered about, National Science Foundation, Department of
Energy, et cetera, and one of the things that would be nice to know
right now is, you know, what has been done and therefore what
could be done now or in the future in this area.
Ms. DAHLKEMPER. So again, having a central lead agency that
can collect all that data and bring that together?
Dr. FREIMAN. Right.
Ms. DAHLKEMPER. Dr. Duclos, did you want to say something?
Dr. DUCLOS. Yeah, I just wanted to give you an idea of this sort
of funding that it takes to solve some of these. These are very challenging problems. But generally, in our experience, and we have
been through a number of challenges here in terms of materials,
you are probably talking something between $5 and $50 million per
element per application for a solution.
Ms. DAHLKEMPER. And obviously we have huge budget concerns
here. What would be the ramifications if we were not able to fund
at the level you think we need to fund?
Dr. DUCLOS. Well, what you do is you go through those five solutions. You take the shorter term ones, the quicker ones, and then
you know, basically challenge yourself to ensure that you have a
supply and work the best you can without doing the longer term,
more expensive work that is the cleaner solution.
DOMESTIC SOURCES
OF
RARE EARTHS
Ms. DAHLKEMPER. Mr. Smith, a question for you. Mountain Pass

Mine. If you go back in, if you have domestic production, can you
get all 17 rare earth minerals out of your locations that you have
and how soon to supply the American, you know, the U.S. needs?
Mr. SMITH. Understood. Thank you. We have all 15 of the lanthanide rare earths in our ore body. We can recover nine of those
75
economically at todays prices, and we can start doing that as early
as 2012.
Ms. DAHLKEMPER. And the others?
Mr. SMITH. Prices will have to go up before they are economic to
recover.
Ms. DAHLKEMPER. And then there are two that you do not have
supplies?
Mr. SMITH. Right, yttrium and scandium.
Ms. DAHLKEMPER. OK. And those are only found in?
Mr. SMITH. They are found in various places, China being one,
Canada has some yttrium.
Ms. DAHLKEMPER. OK. So they are found in other countries besides China?
Mr. SMITH. Correct, although not in the quantities and the concentrations that they are found in China.
EXPANDING U.S. WORKFORCE
Ms. DAHLKEMPER. I did want to ask you just one more question.
I have just a few seconds left here, but if I am back talking to students in my district, because you talked about having an issue with
not being able to find the educated people that you need to work
in your industry; what should I tell them to do?
Mr. SMITH. Tell them to go into rare earths and that we would
like to hire them as interns as soon as possible. We can use all the
people that we can get that have rare earth experience. We found
none when we went out to hire, and we went ahead and took a
risk, hired people with zero experience and about three-and-a-half
years later, they became very productive in our organization.
Ms. DAHLKEMPER. And are there programs out there in different
educational institutions
Mr. SMITH. No, they will have to be established.
Ms. DAHLKEMPER. OK. Thank you very much.
Mr. SMITH. Thank you.
Chairman MILLER. Thank you. Mr. Coffman is now recognized
for five minutes.
DEPENDENCE
ON
FOREIGN PRODUCTS
Mr. COFFMAN. Thank you, Mr. Chairman. Mr. Smith, I come to

the rest of the panel, so I come to this committee via being on the
Armed Services Committee where I became alarmed about the
need and the supply for rare earth elements for advanced weapons
systems.
The one question that I have, Mr. Smith, to ask you a question,
even if the Mountain Pass Mine is reopened, will the United States
still be dependent upon foreign rare earth products? I think you
mentioned there are two that we would still be dependent on.
Mr. SMITH. Yttrium and scandium, yes. And we would still be dependent on other countries like China for portions of our supply
needs. For instance, dysprosium is a very critical rare earth element needed for neodymium-iron-boron magnets. It is part of the
alloy, and it allows the magnet to be used in a higher temperature
application. Mountain Pass can produce a quantity of that mate-
76
rial, but it will likely not be enough to suit the full needs of the
United States relative to the hybrid vehicle industry.
Mr. COFFMAN. OK. Because I read an analysis where at full production that your mine could produce 20,000 tons of rare earth
metals or elements. Is that figure correct?
Mr. SMITH. That is correct. That is our design capacity right now,
and we can, with existing permits in hand, we can actually double
that production to 40,000 tons per year.
Mr. COFFMAN. How long would it take you to get to full production?
Mr. SMITH. We think it would take us until about the middle of
2012 to reach our full, 20,000 ton, design capacity right now.
Mr. COFFMAN. But I understand, if I hear some of the testimony
from today is that China, its demand will meet its supply in the
vicinity of 2012 and that we will have to drastically curb exports.
Am I correct in that?
Mr. SMITH. That is very, very accurate. The problem will be, they
will produce enough for themselves, and it will be the rest of the
world that has to find their alternative supply.
Mr. COFFMAN. Anybody else on the panel? Yes?
Dr. GSCHNEIDNER. I would like to address this product of, you
know, yttrium and scandium, for example. The Canadians have
several mines up there which are rich, and of course, the disposing
point that Mark pointed out, but they are a little bit behind
Molycorp in getting their products up. So I mean, as far as I am
concerned, maybe the Canadians will like it. They are almost another state of the United States. Actually, there is no problem getting materials from them.
Australia has some mines. We have a representative right back
here from the Australian group, and they have several good mines
with materials and they are probably about a year or two behind
Molycorp, so these materials are coming.
Scandium is a little bit rarer but a lot of it comes from Russia.
China has some, too, but I dont think it is a real critical problem,
but it could be in the future. We dont have much scandium. There
arent very good ore sources of scandium. That is the problem, I
think.
MAINTAINING
COMPLETE SUPPLY CHAIN
Mr. COFFMAN. It would seem that the first phase of that supply
chain in terms of mining, it seems that Molycorp may be able to
bridge the gap in terms of China. But I also have a concern about
the other levels of the supply chain in terms of the processing, and
it seems that we have a real deficit in that area, and I think Dr.
Gschneidner, I think you had mentioned the plant in Indiana that
was moved to China. And so, can somebody speak to where we are
in terms of that next step in the supply chain in terms of processing? Mr. Smith, would you like to address that first?
Mr. SMITH. Thank you, Congressman Coffman. To my knowledge,
there are not a whole lot of activities in that regard, other than
Molycorps mining-to-magnets strategy where we will put in the
conversion capabilities to go from oxides to metals. We will have
the capability of taking the metals and alloying them, and we will
77
have the capability of producing neodymium-iron-boron magnets
here in the United States.
Mr. COFFMAN. That is great. Yes?
Dr. GSCHNEIDNER. Well, as I told you, we were preparing these
neodymium-iron-boron magnet material, and that was one of the
things we had come up witha new process for making these metals. And Molycorp, of course, is quite interested and wants to obtain licenses for our technology but will also bring in a battery. So
we are already solving part of that problem, but we are training
people, too, at the same time. So this will help the supply train
down the road. But again, it takes four years to get a Ph.D. out
and two years for a Masters, so you just cant hit a light switch
button and they pop up. But there are people out there that are
reasonably well-trained and could move in pretty fast.
Mr. COFFMAN. Mr. Chairman, I am afraid I am out of time. I
yield back.
KEEPING MANUFACTURING
IN THE
U.S.
Chairman MILLER. Thank you, Mr. Coffman. I will now recognize

myself for a second round of questions. I agree with Mr. Coffman.
I am worried about sophisticated weapons systems that may need
rare earth minerals, but I am also concerned about manufacturing
jobs. My part of North Carolina has seen the loss of a great many
manufacturing jobs that were less-skilled, cut-and-sew jobs in the
apparel industry, but our hope has been to replace those jobs with
highly skilled jobs in very sophisticated, innovative industries.
China seems to be using the leverage of their rare earths to say
if you need these minerals, these rare earth minerals in your products, come build your plant here. Mr. Stewart, you are nodding.
This is the area you work in. What can we do to respond to that?
Mr. STEWART. Well, it is unusual for a country that has joined
the WTO to take on specific obligations in the export arena because
most countries do not maintain these types of restrictions or impediments. So just as the United States has brought the first case
dealing with, I think, eight or nine raw materials that are used in
steel and aluminum and chemicals, the most direct approach is to
take a second case, at least on rare earth products, to the WTO.
It is a process that could take two years to resolve, but the resolution of that should be a very clear finding that China is not permitted to close its markets. It is doing this in a whole range of
products. There was an article in the New York Times yesterday
talking about how China is taking advantage of the rules in the
WTO and the rules in the IMF to maximize their advantage.9 Well,
that is what countries should do. They should be looking after their
own interests. As a commercial power, we should be looking after
our interest which is to see that China is not allowed to violate the
commitments they have made without their being a cost, and the
cost is to bring them in line, which would require them to take the
taxes off, take the quotas off, and in fact make the products available to the highest bidders globally as most raw materials are
done.
9 Keith Bradsher. China Uses Rules on Global Trade to Its Advantage. New York Times,
March 15, 2010: pp. A1, A10.
78
BALANCING PRIVATE
AND
PUBLIC NEEDS
Chairman MILLER. Industrys need seems to be more of a shortterm solution how to get production started again. Government
seems to be more focused on what the long-term risk is of not having these minerals available. How can we kind of allocate our time
and energy between industry and government to address both? Dr.
Duclos.
Dr. DUCLOS. Well, actually, I would say that industrys interest
is both short and long term. To the point earlier, I think an answer
is technology, technology in developing systems and materials technologies that reduce the use of the material, technologies that involve recycling because, as I think everyone has seen, even if we
develop all the sources of the rare earths that weand it depends
a little bit, rare earth by rare earth. But even if we develop all the
sources of rare earths that we see around the world today, we are
still not going to have enough in the sort of 5- to 10-year timeframe.
The solution is to minimize the use of these materials and develop those technologies. That is the long-term solution. The shortterm solution is to certainly develop these sources which we absolutely need, but the long term is to do the technology development,
recycling materials development.
Chairman MILLER. I will yield back my remaining 40 seconds.
Mr. Coffman, do you have an additional round?
CHINESE INDUSTRIAL STRATEGY
Mr. COFFMAN. Thank you, Mr. Chairman. Just to any Member
of the Committee, this strategy which China has deployed to secure
really what is a strategic resource for its domestic industry, is this
in any way calculated to rare earth metals that is different than
any other commodity that China seeks to control for its own industrial base, in your view? Yes, Mr. Stewart.
Mr. STEWART. Well, it is similar to some of the strategies they
have employed on other products where they have a dominant
share of global supply, but there are specific documents that have
come out at the provincial and central government level, both laying out their strategy to be dominant players in these products and
the downstream use of those products and to force investment
through these kinds of strategies. So while it is similar to what
they have been trying to do in some others because these are perceived as high-growth sectors, obviously is the reason that it is of
such great concern to us and many other countries.
Mr. COFFMAN. Very well. Anybody else? Mr. Smith?
Mr. SMITH. I guess it wouldnt be a full rare earth hearing if we
didnt hear this quote, but there was a Chinese premier back in the
1980s that said the Middle East has oil and China has rare earths.
Mr. COFFMAN. Anybody else? Thank you so much for your testimony today. Mr. Chairman, I yield back the balance of my time.
FUNDING MODELS
FOR
MATERIALS RESEARCH
Chairman MILLER. Thank you. Mr. Smith, when you said there
was a Chinese from here, I thought you were starting a limerick.
79
I will now recognize myself for five minutes, although I will not
use five minutes. With other technologies we need to develop, we
feel some urgency about developing high-speed computing and
nanotechnology. We do instruct OMB to publish, to make budget
requests for all agencies contributing to the programs as a whole
and publish an explanation with the Presidents request to Congress. Is that a model that we should follow for materials research
for rare earths? Any of you? Not a topic you have thought a lot
about. OK.
Then I think, Mr. Coffman, unless you want another round of
questioning?
TIMEFRAME
FOR
RE-STARTING DOMESTIC PRODUCTION
Mr. COFFMAN. Mr. Chairman, yes, I have a question for Mr.

Smith. I understand so we are talking full production in your California mine by 2012?
Mr. SMITH. Correct, the middle of 2012.
Mr. COFFMAN. And obviously you seem to be the only game in
town in the United States. Am I correct in that?
Mr. SMITH. So far that is correct.
Mr. COFFMAN. Now, is there anything that, I mean, unforeseen
not necessarily unforeseen. You cant control that. But is there anything that would in fact inhibit you or delay that capability of
bringing that mine on line at that 20,000 ton capability?
Mr. SMITH. There is only one thing that the company needs right
now, Congressman Coffman, and that is the capital to put the
project into play, and that is what we are working on very hard
as we speak.
Mr. COFFMAN. How hard is that? I mean, in your view, how hard
is that?
Mr. SMITH. I think that there will be challenges just because of
the current climate in the banking industry where project financing
is a very difficult way to finance things right now. If you can get
the money at all, it is going to be at very high interest rates and
it is going to be at very short terms, and that is where the DOE
loan guarantee program comes in to help the problem because they
do offer lower interest rates and longer payback periods, and that
is a much more attractive form of capital to use.
Mr. COFFMAN. So in your view, that would seal the deal in terms
of your ability to go forward?
Mr. SMITH. There is no doubt in my mind.
Mr. COFFMAN. Give me a timeframe because it seems to me that
we have a problem here in the sense that if in fact these timeframes are right where China, its demand catches up with the supply in 2012, and I have heard that from a variety of sources.
Mr. SMITH. Right.
Mr. COFFMAN. Your mine needs to come on line in the vicinity
of 2012, and you think you could have full production of 20,000
tons which meets the U.S. demand for the rare earth elements that
you would produce out of your mine. If in fact those things dont
occur, it would seem to me that that would be an extraordinary escalation of price in these rare earth elements because where in fact
would we get them from at that time?
80
Mr. SMITH. There would only be one place, although there are
other mines that are certainly trying to open right now in other
countries. But we are the only game in the United States right
now. It is absolutely imperative that we get this operation up and
running by 2012. The one thing I have learned in my 28 years in
this business is that forecasters are never accurate in what they
forecast, so is it precisely 2012 or is it 2013, 2014, I dont know.
But I think that we can meet the window given the trends that we
see today, but we do need to get going on our project and get going
on it immediately.
Mr. COFFMAN. Mr. Smith, according to your business plan, when
do you have to have your financing in place in order to be in full
production in the vicinity of 2012?
Mr. SMITH. It would have to be in place this summer in order to
have the full production on line and running by the middle of 2012.
Every day we do not have the financing in place, it will be another
day or so delay on the other end.
Mr. COFFMAN. OK. Thank you, Mr. Chairman. I yield back the
balance of my time.
Chairman MILLER. Thank you, Mr. Coffman. I think that is a
fine note to end on, Mr. Coffmans call for a more active role for
government in the economy. And before we bring the hearing to a
close, I want to thank our witnesses for testifying before the Subcommittee today. Under the rules of the committee, the record will
remain open for two weeks for additional statements from the
members and for answers to any follow-up questions the Subcommittee may have for the witnesses and for the submission of extraneous materials. The witnesses are excused, and the hearing is
now adjourned.
[Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]
Appendix:
ANSWERS
TO
POST-HEARING QUESTIONS
(81)
82
ANSWERS
TO
Responses by Stephen Freiman, President, Freiman Consulting, Inc.

Questions submitted by Chairman Brad Miller
Q1. In developing the criticality matrix, and in applying it to the test cases discussed in the report, your committee appears to have gone through many of the
steps that an early warning organization would take. If thats true, what
should Congress learn from your experience that it can apply in setting up similar capabilities within the Government?
A1. To use the matrix as a tool in an early-warning system, the evaluation method
must be become more quantitative. That is, it will be important to base the placement of minerals within the matrix on more quantitative indicators of supply risk
and impact of a supply disruption than the committee was able to do in its testing
of the matrix (e.g., to employ and adapt the matrix in a manner similar to the approach used by General Electric). As I noted in my testimony, the matrix is only
as good as the input data. The Federal Governments access to data and information
about some of the rarer minerals and metals will need to improve because at
present many of these markets are not very transparent (e.g., rare earths, antimony, indium, etc.). As the committee noted in its recommendations, whatever agency is tasked with collecting mineral data, it must have the authority to require such
submissions, as occurs with Principal Statistical Agencies such as the Energy Information Agency.
Q2. If the early warning systems for material supply problems required under the
National Materials and Minerals Policy Act of 1980 are finally established,
which Federal agencies should play a role in them, and what roles should they
play?
A2. The 1980 Act calls out the Departments of the Interior, Commerce, and Defense
as having principal roles. I would add the Department of Energy and the National
Science Foundation(?), and possibly the Department of Transportation, since a number of applications of critical minerals relate to automobiles, etc. The roles of each
of the agencies will differ, e.g. Interior (USGS) would be expected to play the lead
role in collecting and analyzing mineral data, Commerce would have a dual role,
through NIST in measurement and fundamental data and through Commerces role
in analyzing international trade. An important aspect in implementing the 1980 Act
would be to reestablish a coordination of activities of the agencies through OSTP.
Q3. As the former deputy director of the National Institute of Standards and Technologys Materials Science and Engineering Laboratory, how would you say the
Laboratory can contribute to a national research program for rare earth minerals?
A3. The mission of the NIST laboratories is to conduct research that advances the
nations technology infrastructure. As such, within the Materials Science and Engineering Laboratory there are ongoing efforts in developing and maintaining databases on crystal structure and phase diagrams, both of which will be important in
any research program on rare earths.
In addition, the Technology Innovation Program provides cost-shared awards to
industry, universities, and consortia for research on potentially revolutionary technologies that address critical national and societal needs.
Q4. Given your knowledge of Federal capabilities in materials research, which agencies would you see as able to contribute to the development and execution of a
research program as called for by the 1980 Act (30 U.S.C. 1603 (2))?
A4. As the committee noted in its recommendations, and included in my testimony,
a number of Federal agencies, including the National Science Foundation, Departments of the Interior, Defense, Energy, and Commerce should develop and fund activities to encourage U.S. innovation in the area of critical minerals. These same
agencies should coordinate such programs as noted in number (2) above.
83
ANSWERS
TO
Responses by Steven J. Duclos, Chief Scientist and Manager, Material Sustainability, General Electric Global Research
Q1. What information does the Government need, and what information should government and users of minerals be sharing, in order to maximize the lead times
it will have for deciding which of the strategies you described at the hearing
should be pursued in a particular case?
A1. From a manufacturing perspective the sourcing, recycling, manufacturing efficiency, materials substitution, and systems strategies outlined in my testimony will
only be carried out on materials that the U.S. considers both critical to the countrys
defense and manufacturing base and at risk from a supply and demand perspective.
To assess which materials fall into this category an assessment could be done that
is similar to the one proposed by the National Research Council in Minerals, Critical
Minerals, and the US. Economy in 2008. The government would need to update and
expand the list of elements considered by the NRC panel, but the assessment
metrics used by this panel remain viable. Collection in confidence of anticipated future use of materials by industry in the three to five year timeframe, as well as augmenting current supply information collected by USGS with anticipated future supplies, would greatly improve the accuracy of evaluation of future supply and demand
risks. For those materials deemed to be at greatest risk the government could then
solicit business and technology solutions along the strategies outlined in my testimony. Government support of the longer term, higher risk solutions would enable
industry to pursue a greater breadth of solutions that would minimize the risk of
disruption to U.S. manufacturing. By completing this assessment annually the government would better understand the progression of elements along the criticality
diagram, which could lead to an early warning on future risks.
Q2. If GE were interested in partnering with an academic institution or a government facility to develop a substitute material (or find a replacement) for something like Rhenium, what would it be looking for in that partner and what resources would that partner bring to the collaboration?
A2. Pre-competitive information, such as materials property databases, material
property testing capability, and basic understanding of material behavior in systems
is important to accelerate the insertion of new and substitute materials into OEM
systems. Specific details of resources that a partner could bring to such a collaboration would depend greatly on the material to be reduced since each substitution effort tends to be unique to both the element and the application.
Q3. Would General Electrics materials scientists be interested in collaborating with
the type of Centers proposed by Dr. Gschneidner?
A3. Since GE uses permanent magnets in a wide array of products the company
would welcome the opportunity to participate in the type of Center that Dr.
Gschneidner has proposed. In addition to providing material science know-how, the
company would provide a critical role in ensuring that the properties, cost, and reliability of developed substitute materials and processes are compatible with the systems in which they would be used.
Q4. As you serve as the early warning system for General Electric, what advice
would you give a counterpart in the Federal Government trying to provide the
same service for the Nation?
A4. The assessment of risks related to supply and demand should be made as quantitatively as possible. National and international data is available on both the supply and demand sides of the equation, and development of a quantitative risk rating, similar to that discussed in the invited contribution to this hearing
Operationalizing the Concept of Criticality by Dr. Thomas Graedel of Yale University, would aid building the risk assessment. Such an assessment should include a
specific recent elemental challenge, perhaps one from among the rare earths. Comparison of the position on the criticality diagram of this recent elemental risk would
provide a useful relative level of risk of the other elements assessed. In addition,
future material supply scenarios, akin to those built for economies, could be built
for those elements and materials indicated to be at high risk on the criticality diagram. Such scenario building may help elucidate which of the risk reduction processes are most likely to lead to a solution. Finally, since the assessment is only the
84
start of the process it needs to be done expeditiously, to allow time for new sources,
recycling, efficient manufacturing, and material research on substitutions to be developed.
85
ANSWERS
TO
Responses by Karl A. Gschneidner, Jr., Anson Marston Distinguished Professor, Department of Materials Science and Engineering, Iowa State University
Q1. What level of funding would you consider necessary to support the two Centers
you proposed in your testimony?
NATIONAL RESEARCH CENTER ON RARE EARTHS AND ENERGY
A1. The National Research Center on Rare Earths and Energy (NRCREE) should
be composed of five research groups covering the following five areas of greatest
need:
1. Process Metallurgy and Scrap Recovery
2. Permanent Magnet Materials
3. Battery and Electronic Materials
4. Catalytic Materials
5. Materials for Nano Science and Nano Technology
A typical research group would consist of a group leader; staff scientist(s); postdoctoral, graduate and undergraduate students; technical and secretarial support.
The NRCREE would also have critical in-house analytical chemistry and characterization expertise (x-ray diffraction, and optical, electron, atomic force and magnetic force microscopy) as a support group shared by all research groups.
NRCREE would also initiate and support projects in important areas, not covered
by the five research groups at other universities, non-profit research groups, national laboratories, and industry. Some potential topics may be separation science,
optical and photonic research, organometallic chemistry, analytical chemistry.
NRCREE would have a full-time director and a part-time associate director (probably one of the group leaders), an advisory board made up of representatives of the
university, government, industry and general public.
The cost would be $10M per year. The Center should be funded for five years and
reviewed in its fourth year for extension for an additional five year term.
The NRCREE would need a new building for offices and laboratories. There would
be some special space requirements for the Process Metallurgy and Scrap Recovery
Group because it would be involved in scaling up metallurgy production from laboratory size to bench scale to a full pilot plant scale. In addition a special handling facility would be needed for hydrofluoration process, which uses hazardous HF (hydrogen fluoride) gas, to prepare the fluorides which are later reduced to the metals.
The cost of this building is $60M.
NATIONAL RESEARCH CENTER FOR MAGNETIC COOLING
The National Research Center for Magnetic Cooling (NRCMC) would be a fully
integrated center devoted to bringing the energy efficient magnetic cooling (air conditioning/climate control, refrigeration and freezing) from the exploratory stage to
commercial products. Today there are about 30 individual (a few persons at the
most) laboratories scattered around the world (including about 5 in the USA) working on various aspects related to magnetic refrigeration but there is only one group
(Denmark) which is concerned with the complete technology. The NRCMC would
consist of five research groups devoted to the following areas:
1. Modeling and Theory
2. Magnetocaloric Materials
3. Regenerator Design and Fabrication
4. Magnetic Arrays
5. Cooling Machines
A typical group would consist of a group leader; staff scientist(s); post-doctoral,
graduate and undergraduate students; technical and secretarial support.
The NRCMC would also have a key characterization capabilities (x-ray diffraction;
optical, electron, atomic force and magnetic force microscopy; and magnetic property
and thermal transport measurements) support group.
NRCMC would also initiate and support projects in important areas not covered
by the five research groups at other universities, non-profit research groups, na-
86
tional laboratories, and industry. Some topics might be exploratory research on special fabrication techniques and unusual magnetocaloric materials.
NRCMC would have a full-time director and a part-time associate director (probably one of the group leaders), an advisory board made up of representatives of the
university, government, industry and general public.
The cost would be $9M per year. The Center should be funded for five years and
reviewed in its fourth year for extension for an additional five year term.
The NRCMC would need a new building for offices and laboratories. Some special
facilities would need to be considered, for example fabrication equipment for fabrication of regenerators, and machine shops for prototyping cooling machines. The cost
of this building is $50M.
SPECIAL COMMENTS
The above estimates were made on the assumption that the two Centers would
not be co-located. If, however, they were located on the same campus, they should
be combined into one building which would result in some cost savings. For example, the operating expenses would be reduced because the NRCREE and NRCMC
could share the characterization support group personnel and facilities, also the administrative cost could be reduced, i.e. instead of a sum of $19M per year, the operating costs for the two Centers it could be reduced to $18M per year. Also the cost
of the buildings, one instead of two, the combined building would be $95M (compared to $110M for separate buildings).
There are also additional advantages because persons carrying out research and
development activities on permanent magnets in the NRCREE would have access
to the NRCMC scientists and engineers designing permanent magnet arrays and
vice versa, this would be an important synergism. There may be some other indirect
interactions, but there is essentially no overlap between the missions of the two
Centers.
Q2. Which Federal Agencies, other than the Department of Energy, could contribute
to the research programs you would contemplate for the proposed Centers?
A2. The Department of Defense (DOD) and National Institute for Science and Technology (NIST) are logical choices of Federal agencies which could contribute to the
research programs of NRCREE and NRCMC. For example, at the present time the
Office of Naval Research (DOE) is funding a project for cooling electronic hardware
on seafaring vessels, and the U.S. Air Force has funded a few (at least one) SBIR
for magnetic cooling below about 200 C. As far as I am aware NIST has one internal (quite small) project on magnetic cooling. All three of these projects would complement research carried out at the NRCMC.
Q3. Given your knowledge of Federal capabilities in rare earths research, which
agencies do you regard as able to contribute to the development and execution
of a research program as called for by Section 1603(2) of the National Materials
and Minerals Policy Act of 1980?
A3. The best Federal agency to develop and execute a research program called for
by Section 1603(2) of the National Materials and Minerals Policy Act of 1980 would
have been the U.S. Bureau of Mines, Department of Interior, but unfortunately all
of the research laboratories were closed down in 1995 when the Bureau of Mines
went out of existence. Today there is no Federal agency that could easily undertake
the tasks required in Section 1603(2). But with some realignment and priority
changes one of the following Federal agencies should be able to accomplish the goals
of this act: DOE, DOD, NIST and NSF.
87
ANSWERS
TO
Responses by Mark Smith, Chief Executive Officer, Molycorp Minerals, LLC

Q1. As you are planning to operate throughout the rare earths supply chain, can you
tell us what processes in your production chain need immediate increases in
R&D support?
A1. Re-establishing for America a domestic mining-to-magnets supply chain, on
which Molycorp is focused virtually round-the-clock, involves deploying five fundamental steps of production: 1) rare earth mining and milling; 2) oxide production;
3) oxide-to-metals production; 4) metal alloying; and 5) magnet manufacture. All of
these steps are integrally linked to one another, and failure at any one step will
prevent the U.S. from building a full domestic supply chain. Molycorp is investing
significant capital and research and development across all five steps of production.
The new technologies and processes that we are developing and seeking to deploy
at each step of production are contributing to lowering production costs and improving environmental performance. In other words, we are finding that investment in
green process technologies at each step of production is a key driver to lowering
costs and will help the U.S. become the low-cost producer of rare earth materials
and products. This is why investment is needed across the entire production chain,
as opposed to any single step.
Q2. Would you be interested in collaborating with the type of Center Dr. Gschneidner
proposed at the hearing?
A2. Absolutely. As I testified, virtually all analyses show that the U.S. and the
world will need both to increase production of rare earth materials and products as
well as find economic paths to rare earth recycling and substitution technologies.
Questions submitted by Representative Kathleen Dahlkemper
Q1. If you are successful in developing the new magnet production capability, how
likely are we to see a repeat of the Magnaquench episode, where the Defense Department and General Motors set up a domestic magnet producer only to see its
facilities shipped off to China?
A1. Molycorp is committed to establishing and operating the entire rare earth magnet supply chain on U.S. soil. If we are successful in establishing this supply chain,
and if we are able to compete successfully in the global marketas we are confident
of doingthe odds of another Magnaquench happening as a result of investment in
our project are practically zero. That is because we, as a company, believe very
strongly that Americas national and economic security demand that the entire rare
earth magnet supply chain be established and maintained here in America. This is
our goal and our commitment.
Q2. What will guarantee that the benefits that come from investing in your project
will be captured for and kept in the U.S. domestic economy?
A2. If Molycorp is successful in re-establishing a domestic mining-to-magnets supply chain on U.S. soil, then the benefits of that supply chain will clearly flow to the
U.S. economy, including re-establishing a manufacturing base for many end-use
products using rare earth elements. Moreover, studies have clearly shown that research and development activities closely follow industrial bases. Hence, our establishment of the entire supply chain will actually foster research related activities
relating to rare earths. Perhaps more importantly, the U.S. will reap substantial
long-term benefits from a reduction of our dependence on foreign countries for these
strategic materials.
88
ANSWERS
TO
Responses by Terence Stewart, Esq., Managing Partner, Stewart and Stewart

Q1. What are the leading trade considerations that should shape a U.S. national
policy for minerals and materials?
A1. Any new U.S. policy on minerals and materials would presumably be focused
on tracking (1) use and anticipated growth in demand, (2) availability, (3) development of additional sources, (4) development of alternative products and (5) risks to
availability.
WTO rules already in place should reflect the types of trade considerations of importance to the U.S. and any policy it has or develops on minerals and materials
to increase availability (Item 2). These rules could be bolstered by ongoing negotiations within the WTO (Doha negotiations) and in bilateral and plurilateral talks
with major trading partners.
As a general matter, international trade rules and ongoing negotiations look to
open markets and limit restrictions on access to materials and to limit distortions
flowing from government largesse. While there are exceptions that can be important
from a national security perspective, the key element of a proactive policy is the
need to eliminate discrimination in availability of products or access to markets or
raw materials.
More specifically, Article I of GATT 1994 deals with most favored nation treatment of goods on a market access perspective (this means no discrimination between
WTO members); Article III of GATT 1994 requires the provision of national treatment (requiring governments to treat foreign goods the same as domestic goods once
imported) and Article XI of GATT 1994 seeks to eliminate limitations on both imports and exports outside of duties, taxes and other charges. Moreover, some countries in their accession protocols have undertaken specific commitments not to apply
export taxes or duties. This includes China as it pertains to rare earth minerals,
as my testimony at the hearing reviewed.
Hopefully, the current U.S. challenge to Chinas export duties, quotas and licensing requirements on certain raw materials that are not rare earth minerals will confirm the vitality of these considerations vis-a-vis China within the WTO. If China
fairly implements any adverse determination, that may eliminate at least one
source of trade concern for the U.S. on minerals and materials.
Probably it will be necessary for the U.S. to bring a second WTO case against
China dealing with rare earth minerals, to provide additional pressure on China,
and to provide a path forward to a positive resolution of the rare earths dilemma
faced by the United States.
There are trade considerations as well for subsidies which can, of course, be used
to develop capacity, new uses and alternative materials (issues (1), (3) and (4)
above). Trade considerations prohibit export subsidies for most countries and subsidies which are contingent, whether solely or as one of several other conditions,
upon the use of domestic over imported goods. Article 3.1(b) of the Agreement on
Subsidies and Countervailing Measures. At the same time, domestic subsidies for
mineral and materials production and development are permitted where such subsidies are either general in reach or not causing injury to foreign producers (serious
prejudice; nullification or impairment of benefits; injury to the domestic industry of
another member). The U.S. should be vigilant in pursuing trade actions against
trading partners who engage in the use of prohibited subsidies or use domestic subsidies in a manner harmful to U.S. manufacturing. This is particularly true for minerals and materials.
Q2. Which elements of the nations trade apparatus should participate in or contribute to the development of the early warning system for materials and minerals bottlenecks discussed at the hearing?
A2. The U.S. Trade Representatives office prepares annually a National Trade Estimate in cooperation with input from other government agencies and our embassies
and consulates overseas and information from the business community reviewing
barriers to U.S. exports. Actions and policies by many of our trading partners are
reviewed annually. This report could be modified to have a section within the overall report as well as a section in every country that looks at actions by foreign governments that affect any of the five policy issues on minerals and materials.
In addition, the U.S. Department of Commerce and the U.S. Trade Representative
put out an annual report on subsidy practices of our trading partners. In the past,
89
the report has focused on particular industries where there was Congressional interest. Requiring a section in this report that examines the subsidy practices of trading
partners on minerals and metals would be an important step to take.
Finally, historically there has been a so-called special 301 provision in law to
address annually concerns on intellectual property laws and protections amongst
our trading partners. Through a statutory change, a special 301 provision could require an annual evaluation of government policies affecting availability, non-discrimination, national treatment, development and subsidy issues and require consultations with nations viewed as creating artificial barriers to minerals and materials.

House Hearing, 111TH Congress - Rare Earth Minerals and 21ST Century Industry

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House Hearing, 111TH Congress - Rare Earth Minerals and 21ST Century Industry

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RARE EARTH MINERALS AND

21ST CENTURY INDUSTRY

SUBCOMMITTEE ON INVESTIGATIONS AND

COMMITTEE ON SCIENCE AND

Serial No. 11186

U.S. GOVERNMENT PRINTING OFFICE

For sale by the Superintendent of Documents, U.S. Government Printing Office

COMMITTEE ON SCIENCE AND TECHNOLOGY

HON. BRAD MILLER, North Carolina, Chair

Witness List .............................................................................................................

Maintaining a Complete Supply Chain ..............................................................

Appendix: Answers to Post-Hearing Questions

RARE EARTH MINERALS AND 21ST CENTURY

CHAIRMAN BART GORDON

CHAIRMAN BRAD MILLER

Chairman MILLER. I should let everyone be on notice that the

REPRESENTATIVE PAUL C. BROUN

Chairman MILLER. Thank you, Dr. Broun. At the time of Mr.

In the next slide, the hypothetical mineral A is subject to greater

Slide three summarizes the Committees evaluations, and I am

Figure 2. Criticality Evaluations for Selected Minerals or Mineral Families.

Chairman MILLER. Thank you, Dr. Freiman. Dr. Steven Duclos.

Dr. DUCLOS. Chairman Miller, Ranking Member Broun, and

Chairman MILLER. Thank you, Dr. Duclos. Dr. Gschneidner.

Dr. GSCHNEIDNER. Good afternoon, Mr. Chairman, members of

KARL A. GSCHNEIDNER, JR.

by Chemical and Engineering News in the 1970s.

KARL A. GSCHNEIDNER, JR.

Chairman MILLER. Thank you, Dr. Gschneidner. Mr. Smith for

Mr. SMITH. Thank you. Chairman Miller, Ranking Member

On the screen in front of you now I have provided a simplified

Mr. STEWART. Mr. Chairman, members of the Subcommittee,

Mr. Chairman and members of the Subcommittee. Good afternoon. I am pleased

Chairman MILLER. Thank you, Mr. Stewart. At this point we will

MATERIAL SUPPLY PROBLEMS

COMPETE WITH CHINA

Chairman MILLER. Thank you, Dr. Gschneidner. Mr. Smith,

RARE EARTH RESEARCH

Ms. DAHLKEMPER. Thank you, Mr. Chairman, and thank you to

Ms. DAHLKEMPER. Mr. Smith, a question for you. Mountain Pass

Mr. COFFMAN. Thank you, Mr. Chairman. Mr. Smith, I come to

COMPLETE SUPPLY CHAIN

Chairman MILLER. Thank you, Mr. Coffman. I will now recognize

RE-STARTING DOMESTIC PRODUCTION

Mr. COFFMAN. Mr. Chairman, yes, I have a question for Mr.

Responses by Stephen Freiman, President, Freiman Consulting, Inc.

Responses by Mark Smith, Chief Executive Officer, Molycorp Minerals, LLC

Responses by Terence Stewart, Esq., Managing Partner, Stewart and Stewart

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